SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20540
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _________ To ____________
NAL FINANCIAL GROUP INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-25476 23-2455294
- ----------------------- -------------------- ------------------
(State of Incorporation) (Commission File No.) (IRS Employer
Identification No.)
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, Florida 33309
------------------------------
Registrant's telephone number, including area code: (954) 938-8200
Not Applicable
--------------
(Former name, if changed since last report)
Check whether the Registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
(1) Yes X No
--------- --------
(2) Yes X No
--------- --------
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the Registrant's sole class of
common stock, as of November 12, 1996 is 7,347,367 shares.
Transitional Small Business Disclosure Format
Yes No X
----- ------
<PAGE>
NAL FINANCIAL GROUP INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
PART I FINANCIAL INFORMATION*
Item 1. Consolidated Balance Sheets at September 30,
1996 (Unaudited) and December 31, 1995 1
Consolidated Statements of Operations for
the Three months ended September 30, 1996
and 1995 (Unaudited) and for the Nine months
ended September 30, 1996 and 1995 (Unaudited) 2
Consolidated Statements of Cash Flows for the
Nine months ended September 30, 1996
and 1995 (Unaudited) 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and
Analysis or Plan of Operation 7
PART II OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 2. Changes in Securities 24
Item 3. Defaults Upon Senior Securities 24
Item 4. Submission of Matters to a Vote
of Security Holders 24
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 25
</TABLE>
*The accompanying financial information at September 30, 1996 and the quarter
and nine months then ended and the accompanying financial information at
September 30, 1995 and the quarter and nine months then ended is not covered by
an Independent Certified Public Accountant's Report.
<PAGE>
28
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
NAL FINANCIAL GROUP INC.
Consolidated Balance Sheets
(In thousands, except share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
ASSETS:
Cash and cash equivalents $3,090 $921
Restricted cash 1,482 1,032
Finance receivables, net 87,739 101,214
Investment in operating leases 8,905 4,055
Automobile inventory 2,384 1,886
Excess servicing receivables 22,898 4,999
Premises and equipment, net 2,685 1,803
Accrued interest receivable 2,875 1,460
Debt issue costs 2,336 857
Goodwill 3,671 --
Other assets 6,768 3,808
-------- --------
TOTAL ASSETS $144,833 $122,035
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Credit and warehouse facilities $49,191 $33,429
Debt participation interests 21,682 42,380
Convertible subordinated debt 25,843 12,924
Accounts payable and accrued expenses 2,233 1,047
Income taxes payable 4,713 1,604
Stockholder loan -- 2,919
Other liabilities 3,913 3,872
-------- --------
TOTAL LIABILITIES 107,575 98,175
-------- --------
STOCKHOLDERS' EQUITY:
Preferred Stock - $1,000 par value:
10,000,000 shares authorized, no shares issued
Common Stock - $.15 par value:
50,000,000 shares authorized,
7,252,935 shares outstanding at September 30, 1996 and
6,699,987 shares outstanding at December 31, 1995 1,088 1,005
Paid in capital 25,698 18,525
Retained earnings 10,472 4,330
-------- --------
TOTAL STOCKHOLDERS' EQUITY 37,258 23,860
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $144,833 $122,035
======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
NAL FINANCIAL GROUP INC.
Consolidated Statements of Operations
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------------ ---------------------------
1996 1995 1996 1995
------ ------ -------- --------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Finance charges and discount accretion $6,211 $4,876 $17,154 $10,999
Interest expense (2,859) (2,133) (8,218) (4,636)
------- ------ ------- -------
Net interest income 3,352 2,743 8,936 6,363
Provision for credit losses (1,012) (709) (2,801) (1,412)
------- ------ ------- -------
Net interest income after provision
for credit losses 2,340 2,034 6,135 4,951
------- ------ ------- -------
OTHER INCOME:
Gain on sale of contracts 7,147 128 13,427 128
Fees and other 1,220 876 4,670 1,241
------- ------ ------- -------
Total other income 8,367 1,004 18,097 1,369
------- ------ ------- -------
OTHER EXPENSES:
Salaries and employee benefits 3,149 538 6,060 1,373
Depreciation and amortization 575 366 1,250 691
Occupancy expense 310 110 773 289
Professional services 667 201 1,401 488
Other operating expense 2,334 841 4,360 1,673
Non cash charge for the release of
escrow shares 94 -- 301 80
------- ------ ------- -------
Total other expenses 7,129 2,056 14,145 4,594
------- ------ ------- -------
Income before income taxes 3,578 982 10,087 1,726
Provision for income taxes (1,396) (373) (3,945) (656)
------- ------ ------- -------
NET INCOME $2,182 $609 $6,142 $1,070
======= ====== ======= =======
Primary Earnings Per Share:
Net income available to common and common
equivalent shares $2,518 $609 $6,900 $1,070
Weighted average number of common and
common equivalent shares 9,046 6,145 8,484 5,875
Net income per share $0.28 $0.10 $0.81 $0.18
Fully Diluted Earnings Per Share:
Net income available to common and common
equivalent shares $2,885 $609 $7,827 $1,070
Weighted average number of common and
common equivalent shares 11,221 6,341 10,369 6,013
Net income per share $0.26 $0.10 $0.75 $0.18
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
2
<PAGE>
NAL FINANCIAL GROUP INC.
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
---------------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net Income $6,142 $1,070
Adjustments to reconcile net income to net
cash provided by operations:
Accretion of discount -- (599)
Provision for credit losses 2,801 1,412
Depreciation and amortization 3,101 691
Gain on sale of loan pools (13,427) (128)
Non-cash charge - escrow shares 301 80
Return of excess servicing cashflows 1,949 --
Changes in assets and liabilities:
Other, net (760) 362
-------- -------
Net cash provided by operating activities: 107 2,888
-------- -------
Cash flows from investing activities:
Purchase of receivables (197,445) (108,876)
Payments received on receivables 42,427 31,788
Purchase of property and equipment (1,066) (689)
Proceeds from sale of loan pools -- 1,623
Purchase of Special Finance, Inc. (750) (250)
-------- -------
Net cash used in investing activities: (156,834) (76,404)
-------- -------
Cash flows from financing activities:
Net proceeds from financings 196,152 111,094
Repayments of financings (201,088) (40,662)
(Repayments) proceeds of stockholder loan (2,919) 791
Net proceeds from securitization of finance contracts 149,251 --
Proceeds from subordinated debentures 17,500 --
Issuance of common stock -- 2,101
-------- -------
Net cash provided by financing activities: 158,896 73,324
-------- -------
Net increase (decrease) in cash and cash equivalents 2,169 (192)
Cash and cash equivalents, beginning of period 921 665
-------- -------
Cash and cash equivalents, end of period $3,090 $473
======== =======
Supplemental disclosures of cash flows information:
Cash paid during the period for interest $4,724 $3,965
======== =======
Cash paid during the period for taxes $1,465 $346
======== =======
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
3
<PAGE>
NAL FINANCIAL GROUP INC.
Notes to Consolidated Financial Statements
1. Basis of Presentation
The interim financial information of NAL Financial Group Inc. (the
"Company"), which is included herein, is unaudited and has been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB. In the opinion of
management, these interim financial statements include all the adjustments
necessary to fairly present the results of the interim periods and all such
adjustments which are of a normal recurring nature. The interim financial
statements presented herein include the accounts of the Company and its
wholly-owned subsidiaries and should be read in conjunction with the audited
financial statements, and the footnotes thereto, for the year ended December 31,
1995. Certain 1995 amounts have been reclassified to conform with the current
year presentation.
Operating results for the nine month period ended September 30, 1996
are not necessarily indicative of the results which may be expected for the year
ending December 31, 1996.
2. Finance Receivables
Finance receivables as of September 30, 1996 and December 31, 1995
consist of the following:
<TABLE>
<CAPTION>
(in thousands) September 30, 1996 December 31, 1995
------------------ -----------------
<S> <C> <C>
Automobile finance contracts
Gross contracts receivable $97,454 $106,983
Less: Unearned interest (8,154) (7,069)
Deferred acquisition fees (382) (123)
------- --------
88,918 99,791
------- --------
Consumer contracts receivable
Gross contracts receivable 2,056 2,768
Less: Unearned interest (160) (286)
Purchase discount (102) (193)
------- --------
1,794 2,289
------- --------
Mortgage loans receivable
Gross loans receivable 1,559 2,064
Less: Purchase discount (285) (259)
------- --------
1,274 1,805
------- --------
Total finance receivables 91,986 103,885
Reserve available for credit losses (4,247) (2,671)
------- --------
Total finance receivables, net $87,739 $101,214
======= ========
</TABLE>
The reserve available for credit losses consists of an allowance for
losses established through a provision from earnings, non-refundable purchase
discount on automobile finance contracts purchased from dealers, and refundable
reserves such as dealer holdback. Purchase discount represents the differential,
4
<PAGE>
if any, between the amount financed on a contract and the price paid by the
Company to acquire the contract, net of any acquisition costs. Any discount on
automobile finance contracts which management considers necessary to absorb
future credit losses is allocated to the reserve available for credit losses.
The remaining portion of the discount, if any, is recognized as interest income
over the life of the contracts.
3. Excess Servicing Receivables
Excess servicing receivables result from the sale of contracts on which
the Company retains servicing rights and a portion of the excess cash flows.
Excess servicing receivables are determined by computing the difference between
the weighted average yield of the contracts sold and the yield to the purchaser
of the asset-backed security, adjusted for the contractual servicing fee based
on the agreements between the Company and the purchaser. The resulting
differential is recorded as a gain in the year of the sale equal to the present
value of the estimated future cash flows, net of any portion of the excess that
may be due to the purchaser and adjusted for anticipated prepayments,
repossessions, liquidations and other losses. The excess servicing cash flows
over the estimated remaining life of the contracts have been calculated using
estimates for prepayments, losses (charge-offs) and weighted average discount
rates, which the Company expects market participants would use for similar
instruments. The Company updates its cash flows on a quarterly basis using
actual rates of prepayments and losses to assess the remaining value of the
excess servicing receivables in the aggregate.
4. Voting Trust Agreement
On November 30, 1994, the Company became publicly held by virtue of a
merger with an existing, yet inactive, public company. Of the 3,160,000 shares
of the Company's common stock received by certain stockholders in conjunction
with the merger, 400,000 shares were placed into a voting trust agreement (the
"Agreement") by which shares may be released on an annual basis pursuant to a
formula tied to net income earned by the Company. Any shares not released from
the Agreement at the end of three years will be canceled.
Management has evaluated the accounting treatment relating to the
potential release of the shares under the Agreement using recent accounting
guidance and the relevant facts and circumstances, and has determined that the
potential release of approximately 340,000 shares of the total amount of shares
held under the Agreement is not compensatory. The potential release of the
remaining approximately 60,000 shares is considered compensatory based on the
relevant facts and circumstances and, accordingly, an expense has been reflected
for financial reporting purposes as these shares became eligible for release.
This expense was a non-cash charge and did not affect working capital or total
stockholders' equity.
Compensation expense of $301,000 and $80,000 has been recorded for the
nine months ended September 30, 1996 and 1995, respectively, for the portion of
the 60,000 shares that has become eligible for release under the Agreement. As
of September 30, 1996, all of the 400,000 shares under the Agreement have become
eligible for release.
5
<PAGE>
5. Business Combination
As of June 28, 1996, the Company purchased certain assets of Special
Finance, Inc., a Florida based automobile finance company ("Special Finance")
pursuant to an option agreement for a purchase price of $1 million, plus 125,000
shares of the Company's Common Stock and options to purchase 65,000 shares of
Common Stock at an exercise price of $6.00 per share. An option price of
$250,000 paid to Special Finance on August 1, 1995 was credited against the
purchase price. As a result of this purchase, the Company recorded goodwill in
the amount of $3.8 million.
6. Recent Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 123 ("SFAS No. 123"),
"Accounting for Stock-Based Compensation." SFAS No. 123 establishes financial
accounting and reporting standards for stock-based employee compensation plans.
The statement defines a "fair value based method" of accounting for employee
stock options or similar equity instruments and encourages all entities to adopt
that method of accounting for all of their employee stock compensation plans.
However, SFAS No. 123 also allows an entity to continue to measure compensation
costs for those plans using the "intrinsic value based method" of accounting,
which the Company currently uses. The accounting requirements of SFAS No. 123
are effective for transactions entered into during fiscal years beginning after
December 15, 1995. The disclosure requirements are effective for financial
statements for fiscal years beginning after December 15, 1995, or for an earlier
fiscal year for which SFAS No. 123 is initially adopted for recognizing
compensation cost. Management has determined that the Company will continue to
measure compensation costs using the "intrinsic value based method" and will
disclose the effect on net income and earnings per share using the "fair value
based method" in the footnotes to the Company's financial statements upon the
adoption of SFAS No. 123.
In June 1996, the FASB issued Statement of Financial Accounting
Standards No. 125 ("SFAS No. 125"), "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." SFAS No. 125 provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishment of liabilities based on a financial-components
approach that focuses on control. SFAS No. 125 is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring after
December 31, 1996 and is to be prospectively applied. However, a proposal has
recently been developed to defer, for one year, certain provisions of SFAS No.
125. Management is currently evaluating the impact of adoption of SFAS No. 125
on its financial position and results of operations.
7. Subsequent Events
On November 8, 1996, the Company filed a Registration Statement on Form
SB-2 (No. 333-15787) with the Securities and Exchange Commission relating to a
proposed public offering of 2,500,000 shares of Common Stock of which the
Company intends to issue and sell 2,000,000 shares and certain selling
stockholders intend to sell up to 500,000 shares. Net proceeds of the offering
will be used to support growth and for general corporate purposes, including
working capital and future acquisitions.
6
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
The following information should be read in conjunction with the
Consolidated Financial Statements and Notes thereto of the Company included in
this Report.
The Company is a specialized automobile finance company engaged in the
purchase and servicing of automobile finance contracts ("Contracts") originated
by franchised and select independent dealers ("Dealers") in connection with
sales or leases of used and new automobiles to consumers with non-prime credit.
Consumers with non-prime credit are perceived to be relatively high credit risks
due to various factors, including, among other things, the manner in which they
have handled previous credit, the absence or limited extent of their prior
credit history and their limited financial resources. The Company purchases
Contracts relating primarily to the "C" credit segment of the non-prime
automobile finance market. More than 90% of all Contracts acquired by the
Company were originated by franchised Dealers. The Company is also engaged in
providing insurance and related products to its Dealers and customers
through its insurance subsidiary, NAL Insurance Services, Inc. The Company has a
remarketing subsidiary, Performance Cars of South Florida, Inc. with a J.D.
Byrider car dealership franchise, which provides a cost effective means of
disposing of some of the Company's repossessed and off-lease vehicles.
Contract Acquisition
The Company acquires Contracts from diversified sources through its
origination programs. In order to adjust for credit risk and achieve an
acceptable rate of return, the Company typically purchases loan Contracts from
Dealers at a discount from the principal amounts of such Contracts. This
discount is non-refundable to the Dealer. Currently, the discount is being
allocated to the reserve for credit losses. See "Acquisition Discounts." The
following table sets forth the Contracts acquired and the portfolio serviced by
the Company during each of the last five quarters.
<TABLE>
<CAPTION>
For the Quarters Ended
Operating Data Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
(dollars in thousands) 1996 1996 1996 1995 1995
-------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Contracts purchased during the period:
Loan Contracts $76,659 $61,539 $53,533 $53,288 $39,828
Lease Contracts 6,776 3,609 3,686 3,989 4,085
------- ------- ------- ------- -------
Total Contracts Purchased $83,435 $65,148 $57,219 $57,277 $43,913
======= ======= ======= ======= =======
Number of Dealers (at end of
period) 1,594 1,381 1,271 909 787
======= ======= ======= ======= =======
Servicing portfolio (at end of
period):
Owned $108,208 $111,928 $117,210 $113,831 $111,888
Serviced for securitization
trusts 175,679 118,818 73,742 39,934 --
------- ------- ------- ------- -------
Total servicing portfolio $283,887 $230,746 $190,952 $153,765 $111,888
======= ======= ======= ======= =======
</TABLE>
The Company has experienced significant growth in its volume of
Contracts purchased. Contract volume has increased to $83.4 million for the
quarter ended September 30, 1996 from $43.9 million for the quarter ended
September 30, 1995, representing an increase of 90%. The growth in Contract
volume is attributable primarily to the increase in the number of Dealers
participating in the Company's programs, as well as, an expansion of the sources
and amounts of financing available to purchase Contracts. Dealers increased to
1,594 at September 30, 1996 from 787 Dealers at September 30, 1995, representing
an increase of 103%. The growth in Contract volume has resulted in an increase
in the Company's servicing portfolio, which at September 30, 1996 was $283.9
million compared to $111.9 million at September 30, 1995, representing an
increase of 154%.
7
<PAGE>
Revenues
The increase in Contract volume and the servicing portfolio has led to
an increase in revenues as demonstrated in the following table:
<TABLE>
<CAPTION>
For the Quarters Ended
------------------------------------------------------------------------
Revenue Data: Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
(dollars in thousands) 1996 1996 1996 1995 1995
------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Interest income:
Loan Contracts $4,835 $4,703 $3,972 $4,229 $3,619
Lease Contracts 1,284 1,053 969 930 918
------- ------- ------ ------ ------
Total interest income 6,119 5,756 4,941 5,159 4,537
Non-automobile interest income 92 133 114 222 339
Gain on sale of loan Contracts 7,147 3,283 2,997 4,123 128
Other income 1,220 1,935 1,515 1,060 876
------- ------- ------ ------ ------
Total revenues $14,578 $11,107 $9,567 $10,564 $5,880
======= ======= ====== ======= ======
</TABLE>
The Company generates revenues primarily through the purchase, sale and
ongoing servicing of Contracts. The Company earns interest income and fees on
Contracts purchased and held in portfolio, including those awaiting
securitization. Upon the sale of Contracts through the Company's securitization
program, the Company recognizes a gain on sale on the loan Contracts. The
Company continues to service these loan Contracts and earns a servicing fee
currently equal to three percent per annum of the outstanding principal balance
of the loan Contracts sold. The Company also receives revenues from the sale of
insurance and related products, and other miscellaneous fees.
During the quarter ended March 31, 1996, interest income declined
slightly from that reported during the quarter ended December 31, 1995, due
primarily to a decrease in the average balance of the Contracts held in the
portfolio. This decrease was associated with the Company's first sale of loan
Contracts under a securitization transaction in December 1995.
Interest income on the non-automobile portfolio consists of interest
earned on mortgage loans, marine loans and other consumer loans acquired by the
Company through bulk purchases prior to June 30, 1994. The decline in interest
income is due to the run-off of this portfolio.
Gain on sale of loan Contracts decreased during the quarters ended
March 31, and June 30, 1996 when compared to that for the quarter ended December
31, 1995. The decrease was due to a decline in the net spread on the March and
June 1996 securitization transactions when compared to that for December 1995
securitization transaction. See "Gain on Sale of Loans." The decline is also
attributable to an increase in the required level of reserve account necessary
to credit enhance the March and June 1996 securitization transactions when
compared to the reserve account for the December 1995 transaction. The reserve
account is funded upon the closing of a securitization transaction whereby a
portion of the proceeds from the sale is set aside in the reserve account to
8
<PAGE>
protect the purchasers of the asset-backed securities from potential losses.
Gain on sale of loan Contracts subsequently increased during the quarter ended
September 30, 1996, reflecting a larger securitization with a higher net spread
than the previous two securitizations. See "Liquidity and Capital
Resources--Securitizations."
Net Interest Income
Net interest income is the difference between the interest earned on
Contracts held in portfolio, including those awaiting securitization, and the
interest costs associated with the Company's borrowings to finance such
Contracts. Net interest income will fluctuate and be impacted by the spread
between the portfolio yield and the cost of the Company's borrowings, changes in
overall Contract acquisition volume and the timing of securitizations. The
following table illustrates the weighted average net interest rate spread
(expressed as a percentage) earned on Contracts acquired:
<TABLE>
<CAPTION>
For the Quarters Ended
-------------------------------------------------------------------------
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
Net Interest Spread: 1996 1996 1996 1995 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Interest Income (1):
Loan Contracts 23.25% 21.78% 19.29% 19.50% 22.50%
Lease Contracts 18.02 16.45 16.02 19.32 19.16
----- ----- ----- ----- -----
Total automobile 21.91 20.56 18.55 19.47 21.80
Contracts
Non-automobile Contracts 13.27 17.41 13.18 26.35 20.86
----- ----- ----- ----- -----
Total 21.70 20.48 18.38 19.60 21.22
Interest Expense (2) 10.32 10.80 10.12 10.94 11.11
----- ----- ----- ----- -----
Net interest spread 11.38% 9.68% 8.26% 8.66% 10.11%
====== ======= ======= ======= ======
</TABLE>
- -----------------
(1) Represents interest income plus discount accretion (if any) less
amortization of deferred costs, expressed as a percentage of average
receivable outstanding.
(2) Represents interest expense as a percentage of average total debt
outstanding.
The Company has experienced a decline in the net interest spread during
the period from September 30, 1995 to March 31, 1996 for each quarter. This
reflected the shift in the composition of the Company's portfolio from bulk
purchase non-automobile contracts purchased prior to 1995 at large discounts,
which yielded higher rates, to a gradually greater concentration in automobile
Contracts, which yielded lower rates. The net interest spread subsequently
increased during the quarters ended June 30, 1996 and September 30, 1996, as the
Company began to benefit from the expansion into additional states with higher
rates of interest when compared to the allowable rate of interest in Florida,
where the Company has a large concentration. This increase was partially offset
by an increase in the cost incurred on borrowings in connection with the
additional placement of convertible subordinated debentures during the quarters
ended June 30, 1996 and September 30, 1996.
Gain on Sale of Loans
The Company has sold its loan Contracts through the Company's
securitization program in each of the last four quarters. The Company recognizes
a gain on sale of loan Contracts in an amount equal to: (i) the excess servicing
receivable from the trust during the life of the securitization, plus (ii) the
net proceeds received from the securitization less the aggregate book value of
the loan Contracts transferred to the trust. The excess servicing receivable
9
<PAGE>
represents the estimated present value of excess servicing cash flows based on
the Company's estimates for loss and prepayments during the life of the
securitization transaction. Quarterly, the Company reviews the assumptions made
in determining the excess servicing receivable. If the present value of future
aggregate excess servicing cash flows is less than the aggregate capitalized
amount, a charge to servicing income would be made. Excess servicing cash flows
represent the difference between the cash flows on loan Contracts in a
securitization trust and the sum of (i) payments of principal and interest
required to be made to investors in the securitized pool, (ii) the servicing
fee, currently at the rate of three percent per year, and (iii) other on-going
expenses of such trust. See "Liquidity and Capital Resources--Securitizations."
The gain on sale of loan Contracts is affected by, among other things,
the amount of loan Contracts sold in the securitization transaction, the net
spread on the transaction, upfront costs of the transaction and estimated losses
and prepayments on the loan Contracts. Net spread is the major component of the
total gain on sale. The following table illustrates the net spread for each of
the Company's securitizations:
<TABLE>
<CAPTION>
Weighted Interest Rate
Original Average Paid to Gross Net
Securitization Balance Contract Rate Investors (1) Spread (2) Spread (3)
- -------------- ------- ------------- ------------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
1996-3 Auto Trust........ $70,052 19.37% 7.42% 11.95% 8.95%
1996-2 Auto Trust........ 49,500 19.20% 7.58% 11.62% 8.62%
1996-1 Auto Trust........ 40,750 19.26% 7.47% 11.79% 8.79%
1995-1 Auto Trust........ 40,136 19.58% 7.10% 12.48% 9.48%
-------
Total.................... $200,438
========
</TABLE>
- -------------------
(1) Weighted average interest rate paid to investors in the securitization
transaction.
(2) Difference between weighted average Contract rate and weighted average
interest rate paid to investors.
(3) Difference between gross spread less contractual servicing fees.
The increase in the net spread for the 1996-3 Securitization Trust was
attributable to a higher weighted average coupon rate with a corresponding
decrease in the interest rate paid to investors, due primarily to a decrease in
market interest rates. The decrease in the net spread when comparing the 1995-1
Securitization Trust to the 1996-1 Securitization Trust, and further when
comparing to the 1996-2 transaction, reflected a decrease in the weighted
average coupon rate of the loans securitized, and an increase in the rate paid
to investors, due primarily to an increase in market interest rates.
Other Income
The Company generates revenues from the sale of a variety of insurance
and related products to Dealers and its customers, acting as agent for third
party insurance companies. The Company recognizes as revenue the commissions or
fees received upon the sale of these products to customers. Other income also
consists of late fees earned on the Company's servicing portfolio and servicing
fees earned on the Company's securitized portfolios. See "Liquidity and Capital
Resources--Securitizations." Other income has continued to increase due
primarily to the increase in the volume of Contracts purchased and the growth in
the servicing portfolio.
10
<PAGE>
Results of Operations
The following table presents the principal components of the Company's
net income for the periods presented:
<TABLE>
<CAPTION>
For Quarters Ended For Nine Months Ended
------------------------------- -----------------------------------
(in thousands) September 30, September 30, September 30, September 30, 1995
-------------- -------------- -------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net interest income $3,352 $2,743 $8,936 $6,363
Gain on sale of loan Contracts 7,147 128 13,427 128
Other income 1,220 876 4,670 1,241
------ ------ ------ ------
Total revenue 11,719 3,747 27,033 7,732
Provision for credit losses (1,012) (709) (2,801) (1,412)
Operating expenses (7,035) (2,056) (13,844) (4,514)
Non-cash charge for escrow shares (94) -- (301) (80)
------ ------ ------ ------
Income before taxes 3,578 982 10,087 1,726
Provision for income taxes (1,396) (373) (3,945) (656)
------ ------ ------ ------
Net Income $2,182 $609 $6,142 $1,070
====== ====== ====== ======
</TABLE>
Quarters Ended September 30, 1996 and 1995.
Net Interest Income. Net interest income increased to $3.4 million for
the quarter ended September 30, 1996 from $2.7 million for the quarter ended
September 30, 1995. The increase is primarily attributable to: (i) the growth of
average Contracts held in portfolio and those awaiting securitization from $97.4
million for the quarter ended September 30, 1995 to $105.2 million for the
quarter ended September 30, 1996, representing an increase of 8%; and (ii) lower
costs of funds achieved through a lower-cost warehouse facility which were not
available during the comparable quarter in 1995.
Gain on Sale of Loans. The Company completed a $70.0 million
securitization during the quarter ended September 30, 1996, resulting in a gain
on sale of $7.1 million. The Company did not securitize any loans during the
quarter ended September 30, 1995, since the Company's securitization program
began during the fourth quarter of 1995.
Other Income. Other income, consisting of insurance income, late fees
and servicing fees on its securitized portfolios, increased to $1.2 million
from $876,000 for the quarter ended September 30, 1996 and 1995, respectively.
This increase is due to the increase in the volume of Contracts acquired and the
growth of the servicing portfolio to $283.9 million at September 30, 1996 from
$111.9 million at September 30, 1995.
Provision For Credit Losses. During the quarter ended September 30,
1996, the Company recorded a provision for credit losses totaling $1 million
compared to $709,000 for the same quarter of the preceding year. This increase
is primarily due to an increase in the volume of Contracts purchased during the
quarter ended September 30, 1996 versus the corresponding period in 1995 and the
performance of previously purchased Contracts.
Operating Expenses. Operating expenses increased from $2.1 million for
the quarter ended September 30, 1995 to $7.1 million for the quarter ended
September 30, 1996. The increase is primarily due to the absorption of the
operating expenses of Special Finance, Inc., a Florida based automobile finance
company ("Special Finance") which was acquired on June 28, 1996. The increase in
operating expenses is also due to an increase in the servicing portfolio.
Expressed as a percentage of average total servicing portfolio, operating
expenses were approximately 11% and 8% for the quarters ended September 30, 1996
and September 30, 1995, respectively, on an annualized basis.
11
<PAGE>
Non-Cash Charge for Escrow Shares. On November 30, 1994, the Company
became publicly held by virtue of a merger with an existing, yet inactive public
shell. In connection with the merger, certain shares of the Company's common
stock were placed in escrow to be released to certain selling stockholders based
on a formula tied to earnings. For financial reporting purposes, the release of
a portion of these shares is considered compensatory and a non-cash charge to
earnings is reflected in the financial statements. This charge does not affect
working capital or total stockholders' equity. During the quarter ended
September 30, 1996, the Company recorded a charge to earnings of $94,000
compared to $0 for the quarter ended September 30, 1995.
Net Income. Net income for the quarter ended September 30, 1996 was
$2.2 million or $0.26 per fully diluted share. This compares to net income of
$609,000 or $0.10 per fully diluted share for the quarter ended September 30,
1995. Net income, excluding the non-cash charge for release of escrow shares,
was $2.3 million or $0.27 per fully diluted share for the quarter ended
September 30, 1996 in comparison to $609,000 or $0.10 per fully diluted share
for the quarter ended September 30, 1995.
Nine Months Ended September 30, 1996 and 1995.
Net Interest Income. Net interest income for the nine months ended
September 30, 1996 was $8.9 million compared to $6.4 million for the nine months
ended September 30, 1995, representing a 40% increase. This increase was
primarily a result of the growth in average Contracts held in portfolio and
those awaiting securitization from $72.7 million for the nine months ended
September 30, 1995 to $110.5 million for the nine months ended September 30,
1996.
Gain on Sale of Loans. Gain on sale of loans for the nine months ended
September 30, 1996 was $13.4 million compared to $128,000 for the nine months
ended September 30, 1995. No securitizations were completed during the nine
months ended September 30, 1995.
Other Income. Other income, consisting of insurance income, late fees
and servicing fees on its securitized portfolios, increased from $1.2 million to
$4.7 million for the nine months ended September 30, 1995 and 1996,
respectively. This increase was primarily due to an increase in the volume of
Contracts purchased and the growth in the servicing portfolio to $283.9 million
at September 30, 1996 from $111.9 million at September 30, 1995.
Provision for Credit Losses. The Company's provision for credit losses
for the nine months ended September 30, 1996 was $2.8 million compared to $1.4
million for the nine months ended September 30, 1995. This increase related
primarily to provisions recorded for an estimate of possible losses which may be
incurred in connection with the acquisition of new Contracts during 1996 and the
performance of previously purchased Contracts.
Operating Expenses. Operating expenses increased to $14.1 million for
the nine months ended September 30, 1996 compared to $4.6 million for the nine
months ended September 30, 1995. The increase was primarily due to the
absorption of the operating expenses of Special Finance which was acquired on
June 28, 1996. The increase in operating expenses was also due to an increase in
the servicing portfolio. As a percentage of average total portfolio being
serviced by the Company during the year, operating expenses were approximately
9% and 8% for the nine months ended September 30, 1996 and 1995, respectively,
on an annualized basis.
12
<PAGE>
Non-Cash Charge For Escrow Shares. The Company recorded a charge to
earnings of $301,000 for the nine months ended September 30, 1996 compared to
$80,000 for the nine months ended September 30, 1995 for shares released from
the escrow arrangement which was established in connection with the merger.
Net Income. The Company reported net income of $6.1 million or $0.75
per fully diluted share for the nine months ended September 30, 1996 compared to
net income of $1.1 million or $0.18 per fully diluted share for the nine months
ended September 30, 1995. Net income, excluding the non-cash charge for
releasing escrow shares, was $6.4 million or $0.78 per fully diluted share for
the nine months ended September 30, 1996 in comparison to $1.2 million or $0.19
per fully diluted share for the nine months ended September 30, 1995.
Delinquency and Credit Loss Experience
The Company's profitability depends largely upon its ability to
effectively manage delinquency and credit losses. The Company maintains a
reserve available to absorb future credit losses on Contracts that are held in
portfolio and on loan Contracts while they are awaiting securitization. The
Company evaluates historical charge-off experience against the reserve as well
as performs other analyses, including portfolio performance analyses and
delinquency trends, to determine if the reserve is adequate to absorb
estimated future losses.
Acquisition Discounts. The Company purchases Contracts from Dealers at
discounts from their stated principal amount to provide for credit risk. The
discounts typically range from 3% to 10%. The amount of the discount varies
based upon the underwriting tier that the Contract falls within, the terms of
the transaction and the quality of the collateral.
Any discount that management considers necessary to absorb future
credit losses is allocated to the reserves available for credit losses. The
remaining portion of the discount, if any, is recognized as income using the
level-yield method of accretion. Currently, the Company allocates the entire
discount to the reserve available for credit losses and expects to do so for the
foreseeable future. However, the Company will continue to evaluate the
collectibilty of its Contracts in conjunction with the allocation of discounts.
Reserves Available for Credit Losses. In the event of a payment
default, the proceeds from the liquidation of the vehicle may not cover the
outstanding Contract balance and costs of recovery. The Company maintains a
reserve available for credit losses in an amount which management believes is
adequate to absorb future credit losses on Contracts. The reserve available for
credit losses is comprised of the acquisition discounts, an allowance for credit
losses and, in limited cases, dealer reserves. On a monthly basis, the Company
evaluates the adequacy of the reserves available for credit losses by analyzing
the Contract portfolios in their entirety using a "static pool analysis" method
in which the historical charge-offs are stratified according to the Contract
origination date. These Contracts are grouped together by calendar month of
origination, and the related historical charge-off experience on such Contracts
is analyzed to evaluate the reasonableness and adequacy of the reserves
available for credit losses. This analysis takes into consideration historical
loss experience, current economic conditions, levels of repossessed assets,
delinquency experience, seasoning of Contracts, and other relevant factors.
Should management deem the level of acquisition discounts and dealer reserves to
be inadequate, an additional provision for credit losses will be recorded to
increase the allowance for credit losses and, therefore, the overall level of
reserves available for credit losses.
13
<PAGE>
The Company has prepared analyses of its automobile finance Contracts,
based on its credit experience and available industry data, to identify the
relationship between Contract delinquency and default rates at the various
stages of a Contract's repayment term. The results of the analyses suggest that
the probability of a Contract becoming delinquent or going into default is
highest during the "seasoning period" which begins 3 to 4 months, and ends 12 to
14 months, after the origination date. If the volume of Contracts purchases
continues to grow, an increasingly greater portion of the Company's portfolio is
expected to fall into the "seasoning period" described above, causing a rise in
the overall portfolio delinquency and default rates. Assuming no changes in any
other factors that may affect delinquency and default rates, management believes
this trend should stabilize or reverse when the volume of mature Contracts (with
lower delinquency and default rates) is sufficient to offset the total portfolio
delinquency and default rates.
The following table sets forth information regarding credit loss
experience of the total servicing portfolio for the periods presented:
<TABLE>
<CAPTION>
For the Quarters Ended For the Year Ended
------------------------------------------- ------------------
Credit Losses:(1)(4) Sep 30, June 30, March 31, Dec 31,
(dollars in thousands) 1996 1996 1996 1995
----- ---- ---- ----
<S> <C> <C> <C> <C>
Loan Contracts serviced: $220,108 $174,793 $141,370 $107,926
Gross charge-offs percentage (2) 14.06% 9.77% 6.02% 3.68%
Net charge-off percentage (3) 11.36% 5.64% 4.19% 3.68%
Lease Contracts serviced: $29,808 $25,445 $24,139 $22,518
Gross charge-off percentage (2) 5.06% 6.98% 6.40% 4.19%
Net charge-off percentage (3) 2.12% 4.93% 5.57% 4.19%
Total loan and lease Contracts: $249,916 $200,238 $165,509 $130,444
Gross charge-off percentage (2) 12.96% 9.39% 6.08% 3.78%
Net charge-off percentage (3) 10.23% 5.54% 4.41% 3.78%
Recourse Contracts serviced: $24,412 $23,329 $19,036 $18,129
Gross charge-off percentage (2) N/A N/A N/A N/A
Net charge-off percentage (3) N/A N/A N/A N/A
Total servicing portfolios: $274,328 $223,567 $184,545 $148,573
Gross charge-off percentage (2) 12.10% 8.42% 5.40% 3.15%
Net charge-off percentage (3) 9.55% 4.97% 3.92% 3.15%
</TABLE>
- ---------------------
(1) This table excludes non-automobile bulk purchase contracts.
(2) Gross charge-offs are computed as principal balance less liquidation
proceeds received expressed as a percentage of average balance
outstanding during the period.
(3) Computed as gross charge-offs less any recoveries expressed as a
percentage of average balance outstanding during the period.
(4) Percentages for the quarters ended March 31, June 30, and September 30,
1996 have been annualized.
The increase in the level of credit losses is due primarily to the
seasoning of the Company's servicing portfolio when comparing the net
charge-off percentage for the nine months ended September 30, 1996 to that of
the year ended December 31, 1995.
14
<PAGE>
Delinquency Experience. The following table reflects the Company's
delinquency experience for the periods presented:
<TABLE>
<CAPTION>
As of As of As of As of
(dollars in thousands) Sep 30, 1996 June 30, 1996 March 31,1996 Dec 31,1995
------------ ------------- ------------- -----------
<S> <C> <C> <C> <C>
Delinquency(1) (2)
Loan Contracts Serviced $219,787 $174,334 $140,746 $107,191
Delinquencies:
31-60 Days 7.36% 8.46% 6.91% 8.83%
61-90 Days 2.62% 2.86% 2.30% 2.99%
Greater than 90 Days 2.14% 2.38% 2.12% 2.18%
-------- -------- -------- --------
Total 12.12% 13.70% 11.33% 14.00%
Lease Contracts Serviced $29,098 $24,541 $23,033 $21,361
Delinquencies:
31-60 Days 4.69% 5.20% 5.44% 7.51%
61-90 Days 1.39% 2.43% 1.82% 1.90%
Greater than 90 Days 2.66% 1.51% 1.10% 1.83%
-------- -------- -------- --------
Total 8.72% 9.14% 8.36% 11.24%
Recourse Contracts Serviced $24,412 $23,329 $19,036 $18,129
Delinquencies:
31-60 Days 11.52% 8.30% 13.32% 16.99%
61-90 Days N/A N/A N/A N/A
Greater than 90 Days N/A N/A N/A N/A
-------- -------- -------- --------
Total 11.52% 8.30% 13.32% 16.99%
Total Contracts $273,297 $222,204 $182,815 $146,681
Delinquencies:
31-60 Days 7.44% 8.08% 7.39% 9.65%
61-90 Days 2.25% 2.51% 2.00% 2.46%
Greater than 90 Days 2.00% 2.03% 1.77% 1.86%
-------- -------- -------- --------
Total 11.69% 12.62% 11.16% 13.97%
======== ======== ======== ========
</TABLE>
- -------------------------
(1) Table excludes non-automobile contracts.
(2) Table excludes certain portfolios which are accounted for on a cost
recovery basis.
Liquidity and Capital Resources
The Company's business requires substantial cash to support the growth
in Contracts purchased. In general, the Company finances the purchase of
Contracts through its credit facilities. The Company funds through these
facilities between 80% and 90% of the principal balance of the Contracts. The
Company funds the remainder of the purchase price through its capital. As the
Company continues to increase the volume of Contracts purchased, it must secure
additional capital to support its growth. The Company's growth has been
facilitated by its ability to successfully complete private placements of debt
and equity securities and through securitization.
Through September 30, 1996, the Company had secured its principal
source of working capital through senior indebtedness comprised its warehouse
facility, revolving credit facilities and its specialized borrowing facility, as
well as subordinated indebtedness consisting of unsecured subordinated
debentures.
15
<PAGE>
The following table presents the composition of the Company's credit
facilities, specialized borrowing facility and outstanding borrowings, as well
as proceeds received from the private placement of securities and sales of loans
under securitizations for the periods presented.
<TABLE>
<CAPTION>
(In thousands) For the Quarters Ended
Sources of Financing September 30, 1996 September 30, 1995
-------------------- ------------------ ------------------
<S> <C> <C>
Warehouse Facility:
Available Line $50,000 $50,000
Outstanding Balance 21,457 10,000
Revolving Credit Facilities:
Available Line 45,000 45,000
Outstanding Borrowings 27,231 21,733
Revolving Line of Credit Facility:
Available Line 3,500 --
Outstanding Borrowings 503 --
Specialized Borrowing Facility 21,682 47,144
Subordinated Debentures:
Issued - Cumulative 38,825 15,400
Converted to Common Stock - Cumulative (12,825) (7,200)
------- -------
Outstanding 26,000 8,200
------- -------
Unsecured Notes -- 35
Note Due to Stockholder -- 854
------- -------
Total Outstanding Borrowings $96,873 $87,966
======= =======
Net Proceeds from Sales of Loans Under
Securitizations $65,656 $ --
======= =======
</TABLE>
Warehouse Facility. During September 1995, the Company entered into a
$50 million warehouse facility (the "Warehouse Facility") with Greenwich Capital
Financial Products, Inc. ("Greenwich"). In November 1996, the Warehouse Facility
was increased to $100 million. This facility is structured as a reverse
repurchase agreement which is characterized as borrowings for financial
reporting purposes. Under the terms of this facility, the Company receives an
advance of approximately 90% of the outstanding principal balance of the loan
Contract at an interest rate of 2.25% over 30 day LIBOR. If at any time during
the financing period 90% of the market value of the Contract is less than the
amount advanced, Greenwich may require the Company to transfer money or
additional Contracts to Greenwich until the margin amount is satisfied. Market
value may be affected by, among other things, sudden changes in interest rates,
delinquency rates and credit losses. Although management believes that this is
unlikely to occur to any significant degree, a margin call could require an
allocation of certain of the Company's liquidity and capital resources. The term
of the facility is for one year, automatically renewable for an additional year,
subject to certain conditions. At September 30, 1996, the Company had $21.5
million outstanding under the Warehouse Facility.
16
<PAGE>
The Warehouse Facility includes certain financial and operational
covenants including, among other things, the required maintenance of a minimum
net worth of $30 million, prohibition upon a debt to equity ratio in excess of 8
to 1, and the maintenance of certain loan portfolio performance criteria. For
the purpose of the Greenwich Facility, net worth has been defined as total
stockholders' equity plus subordinated indebtedness not due within 90 days. At
September 30, 1996, the Company was in compliance with all relevant financial
and operational covenants. Management continues to closely monitor the
performance of its loan portfolios in order to insure compliance with all
financial and operational covenants.
An event of default is also deemed to occur under the Warehouse
Facility in the event of the death of two of the Company's executive officers
(or if both of these individuals cease serving as officers) or if the Company is
unable to securitize at least $250 million of loans over a two-year period, with
at least $100 million securitized in any 365-day period.
The Company uses the Warehouse Facility to purchase loan Contracts with
the objective to sell such contracts through securitization transactions.
Towards that end, since the fourth quarter of 1995, the Company has completed
the sale of in the aggregate of approximately $200 million of automobile loans
in privately-placed securitization transactions. The proceeds from the Company's
securitization transactions have historically been used to pay down the
Warehouse Facility, thereby making this facility available to fund purchases of
additional Contracts.
Revolving Credit Facilities. In March 1993, the Company entered into a
$20 million three-year revolving credit facility (the "Congress Facility") with
Congress Financial Corporation ("Congress") which has been extended until March
1997. The Congress Facility bears interest at a floating rate of 2% over the
prime rate of CoreStates Bank, N.A., with interest payable monthly. The facility
is secured by certain loan and lease Contracts. The Congress Facility can be
utilized for the financing of additional Contract purchases which meet certain
credit guidelines established by Congress, in its sole discretion. As of
September 30, 1996, the Company had $3.5 million outstanding under this line.
During February 1994, the Company entered into a $5 million one-year
revolving credit facility (the "GECC Facility") with GE Capital Credit Corp.
("GECC"). In September 1994 and March 1995, the GECC Facility was increased to
$10 million and $25 million, respectively. The GECC Facility bears interest
payable monthly at rates fixed at the time of financing and is secured by
certain lease and loan Contracts. Principal is repaid monthly according to an
agreed upon schedule. At September 30, 1996, the Company had drawn down
approximately $23.7 million under this facility. The GECC Facility is
automatically renewed annually unless GECC provides the Company with notice of
termination 90 days prior to a renewal date.
The Congress Facility and the GECC Facility are also subject to certain
financial and operational covenants that are similar to those imposed under the
Warehouse Facility.
Revolving Line of Credit Facility. During September 1996, the Company
entered into a one year $3.5 million revolving line of credit (the "LOC
Facility") with a private, third party. The LOC Facility bears interest at a
fixed rate of 13% with interest payable monthly. The LOC Facility is secured by
certain loan Contracts. As of September 30, 1996, the Company had drawn down
approximately $503,000 under this facility. The LOC Facility is renewable at the
lender's discretion for an additional one year period provided the Company meets
certain conditions.
17
<PAGE>
Specialized Borrowing Facility. The Company historically has secured a
significant amount of its financing through borrowings classified as debt
participation agreements, in which the Company has sold an undivided interest,
typically 80% to 90%, in portfolios of receivables on a full recourse basis to
financial institutions and individual lenders. As of September 30, 1996, the
Company had an existing series of borrowings under a specialized borrowing
facility with Fairfax Savings, a Federal Savings Bank ("Fairfax") in the
approximate amount of $21.7 million. Approximately $21.0 million of the Fairfax
financing has been utilized to acquire Contracts. Borrowings under this facility
are subject to interest at prime plus 2.5% fixed at the time of the financing.
The remaining approximately $700,000 of the Fairfax financing has been utilized
to acquire bulk purchase portfolios prior to 1995. These amounts are subject to
interest at fixed rates from 10% to 13.5%, respectively.
In general, under the terms of the participation agreements, the
lender's principal advance is repaid in proportion to the principal received
from the underlying collateral. Interest on the outstanding principal balance of
the advance is due monthly. Collections received in excess of the principal and
interest due Fairfax are allocated to a restricted cash reserve account on
deposit with Fairfax until certain specified balances are maintained, generally
calculated as a percentage of the outstanding balance of the advance. Any
remaining collections are paid to the Company.
Private Placement of Convertible Subordinated Debentures, Warrants and
Common Stock. The Company has secured a significant component of its capital
through the private placement of debt and equity securities. During the period
from April 1995 through September 1996, the Company issued (i) 176,500 shares of
its Common Stock which yielded net proceeds of approximately $2.1 million; (ii)
$38.9 million principal amount of convertible subordinated debentures (the
"Debentures"); and (iii) 2,913,625 common stock purchase warrants (the
"Warrants"). The Warrants were issued to Debenture holders in connection with
the sale of the Debentures, to certain consultants and advisors in consideration
for financial advisory services and to certain members of the Board of Directors
in connection with joining the Board.
In April and September 1996, the Company concluded institutional
placements of $10 million principal amount of 9% Debentures with 675,000
Warrants, and $5 million principal amount of 10% Debentures with 62,500
Warrants, respectively.
Through September 30, 1996, an aggregate of $12.8 million principal
amount of the Debentures were converted into 1,358,417 shares of Common Stock.
The principal amount and accrued interest due under the remainder of the
Debentures is convertible into shares of Common Stock (at the option of the
holders thereof) at conversion prices ranging from $9 to $12.
As of September 30, 1996 the Company had $26 million principal amount
of Debentures outstanding with maturity dates as follows: (i) $5.5 million in
November/December 1996; (ii) $10.0 million in October 1997; (iii) $3.0 million
in July/August 1998; (iv) $5.0 million in September 1998 (subject to extension
by holder); and (iv) $2.5 million in January 1999.
If the Company's stock achieves certain trading prices ranging from $18
to $25, the Company has the right to serve notice of redemption on the holders
of approximately $16 million of the Debentures for the principal amount thereof
(together with accrued interest). A notice to redeem would likely yield
conversion of the Debentures (since the average trading price of the stock
necessary to redeem would yield a greater profit to the Debenture holders upon
conversion rather than redemption). Notwithstanding rights of redemption,
management believes that a substantial number of the remaining Debentures will
18
<PAGE>
be subject to conversion prior to their maturity, however, a possibility exists
that the Company could be required to allocated liquidity and capital resources
to their retirement to these Debentures.
The Company may also secure certain amounts of capital in the future
from the exercise of existing Warrants. The Company has issued 2,913,625
Warrants at exercise prices between $9 and $15. To date, none of the Warrants
have been exercised. If exercised, the Company would receive aggregate gross
proceeds of approximately $33.1 million.
Exercise of the Warrants is largely a function of the spread between
the trading price of the Company's Common Stock and the exercise price of the
Warrants. Thus, there can be no assurances that the future trading prices of the
Company's Common Stock will be sufficient to encourage the exercise of a
material number of the Warrants in the near term, if at all.
Exercise of the Warrants is also a function of other factors such as
the term of the Warrant or any associated rights of redemption. Principally all
of the outstanding Warrants shall remain outstanding until 1998 and 1999,
although some remain outstanding until 2001. In addition, certain of the
Warrants contain features that permit redemption (at $.001 per Warrant) based
upon average trading prices of the Company's Common Stock between $15 and $25.
Any call for redemption will have the likely effect of causing the exercise of
these Warrants.
The Company's liquidity and capital resources may continue to be
affected by the trading price of the Company's Common Stock. Trading prices at
levels consistently higher than the conversion prices of the Debentures will
likely facilitate conversion of the Debentures in the near term. A conversion of
the Debentures would positively affect the Company's liquidity by eliminating
the need to repay the principal amount (and in certain instances, interest) due
thereunder. Trading prices at levels consistently lower than the conversion
prices of the Debentures, however, will make conversion of the Debentures less
likely, thus requiring the Company to allocate certain of its capital resources
towards the retirement of the Debentures at maturity. If all of such Debentures
were converted, the Company would not be required to repay approximately $30.3
million (including principal and interest at maturity) as of September 1996. In
addition, an exercise of all of the Warrants would have the effect of securing
approximately $33.1 million of additional working capital. However, there can be
no assurances that the issuance of such shares would not have a depressive
effect upon the market for the Company's Common Stock.
Securitizations. Securitization of loan Contracts is an integral part
of the Company's continuing financing strategy. Securitization: (i) provides a
lower cost of financing; (ii) allows the Company to increase its liquidity;
(iii) provides for redeployment of capital; (iv) reduces risks associated
with interest rate fluctuations; (v) reduces credit risk; and (vi) properly
matches the duration of the financing to the assets financed. The Company uses
the net proceeds from a securitization to repay the loans outstanding under its
Warehouse Facility, thereby creating availability to purchase additional loan
Contracts. The Company has completed four securitizations totaling approximately
$200 million. The following is a summary of the basic structure of the Company's
last four securitizations. There can be no assurances, however, that the Company
will continue to use this structure for future securitizations.
19
<PAGE>
The Company transfers a pool of loan Contracts to a trust (the "Trust")
which simultaneously issues one or more classes of securities (the "Securities")
backed by the assets of the Trust. The assets of the Trust include the loan
Contracts and a reserve account. Initially, the Company makes a deposit into the
reserve account and thereafter, it maintains the reserve account at certain
levels (the "Maintenance Level") during the life of the securitization by
depositing certain cash flows from the Trust which the Company would otherwise
have received. The Company continues to service the loan Contracts and earns a
contractual servicing fee of 3% per annum (the "Contractual Servicing Fee").
The Securities are rated "A", "BBB" and "BB" by Duff and Phelps Credit
Rating Co. and Fitch Investors Services L.P.; and are sold to investors in a
private offering. These Securities carry fixed interest rate coupons, payable
quarterly. Generally, all collections of interest and principal from loan
Contracts are utilized to pay interest due on the Securities and to reduce the
principal balance of the Securities. Collections of interest in excess of that
required to pay for (i) the interest due on the Securities, (ii) ongoing fees
and expenses of the Trust, and (iii) the Contractual Servicing Fees (the "Excess
Servicing Cash Flows") are deposited into the reserve account only to the extent
necessary to maintain it at the required Maintenance Level. The remaining Excess
Servicing Cash Flows, if any, are paid to the Company. In the event that the
collections of interest and principal from the loan Contracts are not sufficient
to cover the required distributions of interest and principal on the Securities,
the trustee may withdraw funds from the reserve account to make up for the
shortfall.
The Company recognizes a gain on sale of the loan Contracts from the
securitization in an amount equal to: (i) the excess servicing receivable from
the Trust during the life of securitization, plus (ii) the net proceeds received
from the securitization less the aggregate book value of the loan Contracts
transferred to the Trust. The excess servicing receivable represents the present
value of the Excess Servicing Cash Flows after taking into account the Company's
estimates for the net credit loss and prepayment on the loan Contracts in the
Trust.
The gain on sale through securitization has been a significant
component of the Company's revenues in each of the four quarters in which the
securitization transactions have been completed. The Company believes that such
gain on sale will continue to represent a significant source of the Company's
revenues in all financial reporting periods in which the Company completes a
securitization. If for any reason whatsoever, the Company is unable to complete
a securitization during a quarter, then the Company's revenues for such period
would decline. Also, failure to complete a securitization of the loan Contracts
or delays in completing such securitization could further subject the Company to
interest rate risk since the Company finances the loan Contracts through
floating interest rate Warehouse Facility.
Under the terms of each securitization, the Company is required to
maintain a reserve account at specific levels during the life of the
securitization. Upon the occurrence of certain trigger events, which relate to
delinquency, repossession or credit loss rates exceeding certain levels, the
terms of the securitization transactions require the Company to maintain the
reserve account at higher levels by restricting the distribution of both
contractual servicing cash flows and Excess Servicing Cash Flows to the Company.
20
<PAGE>
Once the reserve account is maintained at the higher level and the trigger
events cease to occur for a specified period, the Company would continue to
receive its contractual servicing fees and Excess Servicing Cash Flow, including
those servicing fees and Excess Servicing Cash Flows that were delayed during
the trigger event period. The occurrence of trigger events could materially
adversely effect the Company's liquidity. Two of the Company's securizations
have recently experienced trigger events. As a result, the Company's rights to
receive contractual servicing fees and Excess Servicing Cash Flows have been
suspended from these two securizations. Continued occurrence of the trigger
events could delay cash flows to the Company which may have a material adverse
impact.
The Company continues to explore alternative structures for the
securitization of its loan Contracts in order to achieve a lower cost of
financing and to maximize the net proceeds from the securitization. Management
believes that it would lower the cost of financing by structuring the
securitization in a manner that results in the issuance of triple-A rated
Securities backed by the assets of the Trust, and then by selling such
Securities in a public offering. However, there can be no assurances that the
Company will be able to achieve this in the near future.
Other Uses of Working Capital
In June 1996, the Company purchased certain assets of Special Finance
pursuant to an option agreement for a purchase price of $1 million, plus 125,000
shares of the Company's Common Stock and options to purchase 65,000 shares of
Common Stock at $6.00 per share. An option price of $250,000 paid to Special
Finance on August 1, 1995 was credited against the purchase price. Special
Finance is a Florida based automobile finance company which purchases and
brokers finance contracts from dealerships in twelve states. Prior to the
acquisition, the Company purchased a significant volume of loan Contracts from
Special Finance. Of the Company's outstanding contracts as of September 30,
1996, approximately 46% were acquired from Special Finance.
During June 1996, the Company allocated certain capital resources
towards the repayment of an outstanding stockholder loan in the amount of
approximately $3 million.
Recent Developments
On November 8, 1996, the Company filed a Registration Statement on Form
SB-2 (No. 333-15787) with the Securities and Exchange Commission relating to a
proposed public offering of 2,500,000 shares of Common Stock of which the
Company intends to issue and sell 2,000,000 shares and certain selling
stockholders intend to sell up to 500,000 shares. Net proceeds of the offering
will be used to support growth and for general corporate purposes, including
working capital and future acquisitions.
Effects of Inflation
Inflationary pressures may have an effect on the Company's internal
operations and on its overall business. The Company's operating costs are
subject to general economic and inflationary pressures. Operating costs have
increased during the past year due primarily to the expansion of the Company's
operations. The Company's business is subject to risk of inflation. Significant
increases in interest rates that are normally associated with strong periods of
inflation may have an impact upon the number of individuals that are likely or
able to finance the purchase or lease of an automobile.
21
<PAGE>
Recent Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 123 ("SFAS No. 123"),
"Accounting for Stock-Based Compensation." SFAS No. 123 establishes financial
accounting and reporting standards for stock-based employee compensation plans.
The statement defines a "fair value based method" of accounting for employee
stock options or similar equity instruments and encourages all entities to adopt
that method of accounting for all of their employee stock compensation plans.
However, SFAS No. 123 also allows an entity to continue to measure compensation
costs for those plans using the "intrinsic value based method" of accounting,
which the Company currently uses. The accounting requirements of SFAS No. 123
are effective for transactions entered into during fiscal years beginning after
December 15, 1995. The disclosure requirements are effective for financial
statements for fiscal years beginning after December 15, 1995, or for an earlier
fiscal year for which SFAS No. 123 is initially adopted for recognizing
compensation cost. Management has determined that the Company will continue to
measure compensation costs using the "intrinsic value based method" and will
disclose the effect on net income and earnings per share using the "fair value
based method" in the footnotes to the Company's financial statements upon the
adoption of SFAS No. 123.
In June 1996, the FASB issued Statement of Financial Accounting
Standards No. 125 ("SFAS No. 125"), "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." SFAS No. 125 provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishment of liabilities based on a financial-components
approach that focuses on control. SFAS No. 125 is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring after
December 31, 1996 and is to be prospectively applied. However, a proposal has
recently been developed to defer, for one year, certain provisions of SFAS No.
125. Management is currently evaluating the impact of adoption of SFAS No. 125
on its financial position and results of operations.
22
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
When used in this Quarterly Report on Form 10-QSB and in other public
statements by the Company and Company officers, the words "may," "will,"
"expect," "anticipate," "continue," "estimate," "project," "intend," and similar
expressions are intended to identify forward-looking statements regarding events
and financial trends which may affect the Company's future operating results and
financial position. Such statements are subject to risks and uncertainties that
could cause the Company's actual results and financial position to differ
materially. Such factors include, among others: (i) the Company's ability to
retain existing or obtain additional financing at rates and upon terms
acceptable to the Company in order to maintain and expand its portfolio of
finance contracts and to continue the periodic warehousing and sale of such
contracts in securitization transactions; (ii) the potential adverse effect a
decrease in the trading price of the Company's common stock would have upon the
Company's ability to obtain financing through the placement of debt and equity
securities, and upon the likelihood of conversion of outstanding debentures and
the exercise of outstanding warrants; (iii) the potential depressive impact an
influx of shares into the market may have upon the trading price of the
Company's common stock upon the resale of shares issuable upon the conversion of
outstanding debentures or upon the exercise of outstanding warrants; (iv) the
sensitivity of the Company's business to general economic conditions associated
with the non-prime market, including risks associated with interest rate
fluctuations, default and prepayment of contracts, market concentrations and
risks associated with recovery of residual value; (v) the reliance of the
Company upon the continued service of its executive officers; (vi) the Company's
ability to remain in compliance with numerous federal and state consumer
protection laws and regulations; and (vii) other economic, competitive and
governmental factors affecting the Company's operations, market, products and
services. Additional factors are described in the Company's other public reports
and registration statements filed with the Securities and Exchange Commission.
Readers are cautioned not to place undue reliance on forward-looking statements
when made, which speak only as of the date made. The Company undertakes no
obligation to publicly release the results of any revision of these
forward-looking statements to reflect events or circumstances after the date
they are made or to reflect the occurrence of unanticipated events.
23
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C> <C>
4.14 Securities Purchase Agreement between NAL Financial Group Inc. and
Merrill Lynch World Income Fund, Inc. and Convertible Holdings, Inc.
dated September 12, 1996
4.15 10% Subordinated Convertible Debenture in the principal amount of
$2,250,000 payable to Bridge Rope & Co.
4.16 10% Subordinated Convertible Debenture in the principal amount of
$2,750,000 payable to Kane & Co.
4.17 Common Stock Purchase Warrant granted to Bridge Rope & Co. ($13.92)
4.18 Common Stock Purchase Warrant granted to Kane & Co. ($13.92)
4.19 Registration Rights Agreement between NAL Financial Group Inc. and
Merrill Lynch World Income Fund, Inc. and Convertible Holdings, Inc.
dated September 12, 1996
10.32 Administration Agreement among NAL Auto Trust 1996-3, NAL Acceptance
Corporation and Bankers Trust Company dated September 11, 1996
10.33 Receivables Purchase Agreement among NAL Acceptance Corporation,
Autorics, Inc. and Autorics II, Inc. dated as of September 11, 1996
10.34 Sale and Servicing Agreement among NAL Auto Trust 1996-3, Autorics
II, Inc., NAL Acceptance Corporation and Bankers Trust Company dated
as of September 11, 1996
10.35 Indenture between NAL Auto Trust 1996-3 and Bankers Trust Company
dated as of September 11, 1996
10.36 Trust Agreement between Autorics II, Inc. and Wilmington Trust
Company dated as of September 11, 1996
11 Statement Re: Computation of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant caused this Form 10-QSB to be signed on its behalf by the
undersigned, thereunto duly authorized.
NAL FINANCIAL GROUP INC.
By: /s/ Robert R. Bartolini Dated: November 12, 1996
-------------------------------------
Robert R. Bartolini
Chairman of the Board
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert J. Carlson Dated: November 12, 1996
-------------------------------------
Robert J. Carlson
Vice President, Finance
(Principal Financial
and Accounting Officer)
SECURITIES PURCHASE AGREEMENT
Dated as of September 12, 1996
between
NAL FINANCIAL GROUP INC.
and
MERRILL LYNCH WORLD INCOME FUND, INC.
and
CONVERTIBLE HOLDINGS, INC.
<PAGE>
TABLE OF CONTENTS
-----------------
Section Page
- ------- ----
1. Definitions................................................. 1
2. The Purchase of Securities
2.1. Sale and Purchase of Securities................ 9
2.2. Use of Proceeds................................ 10
3. Conditions Precedent
3.1. Conditions to the Purchase..................... 10
4. Representations and Warranties of the Purchasers
4.1. Organization................................... 12
4.2. Due Execution, Delivery and Performance
of the Agreement............................... 12
4.3. Investment Representation...................... 12
4.4 Nominee Ownership.............................. 13
5. Representations and Warranties of the Company
5.1. Corporate Existence; Compliance with Law....... 13
5.2. Executive Offices.............................. 14
5.3. Subsidiaries................................... 14
5.4. Corporate Power; Authorization;
Enforceable Obligations........................ 14
5.5. SEC Documents.................................. 15
5.6. Absence of Certain Changes or Events........... 15
5.7. Intentionally Omitted.......................... 16
5.8. Ownership of Property.......................... 16
5.9. No Default..................................... 17
5.10. Employment Matters............................. 17
5.11. Other Ventures................................. 17
5.12. Taxes.......................................... 17
5.13. ERISA.......................................... 18
5.14. No Litigation.................................. 20
5.15. Employment and Labor Agreements................ 20
5.16. Other Contracts................................ 20
5.17. Patents, Trademarks, Copyrights and
Licenses....................................... 21
5.18. Licenses....................................... 21
5.19. Capital Structure of the Company............... 21
5.20. Investment Company Act......................... 22
5.21. Underwriting Guidelines........................ 22
5.22. Senior and Other Indebtedness.................. 22
6. Financial Statements and Information
6.1. Reports and Notices............................ 22
7. Affirmative Covenants
7.1. Payment of Principal and Interest.............. 26
7.2 Notice of Default.............................. 26
7.3. Maintenance of Existence and Conduct
of Business.................................... 26
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<PAGE>
7.4. Payment of Obligations......................... 26
7.5. Books and Records.............................. 27
7.6. Litigation..................................... 27
7.7. Insurance...................................... 27
7.8. Compliance with Law............................ 27
7.9. Agreements..................................... 27
7.10. Employee Plans................................. 27
7.11. Access......................................... 29
8. Negative Covenants
8.1. Mergers, Etc. ................................. 30
8.2. Investments; Loans and Advances................ 30
8.3. Indebtedness................................... 31
8.4. Liens.......................................... 31
8.5. Capital Expenditures........................... 31
8.6. Cancellation of Indebtedness................... 31
8.7. ERISA.......................................... 31
8.8. Tax Sharing.................................... 32
8.9 Amendment of Certificate of Incorporation...... 32
8.10 Limitation on Dividends and Other Payment
Restrictions................................... 32
8.11 Employee Loans................................. 33
8.12 Transactions with Affiliates................... 33
8.13 Sales of Assets................................ 33
9. Events of Default; Rights and Remedies
9.1. Events of Default.............................. 33
9.2. Remedies....................................... 37
10. Securities Law Matters
10.1 Legends........................................ 37
11. Miscellaneous
11.1. Press Releases................................. 38
11.2. Expenses and Other Fees........................ 38
11.3. Assignment..................................... 38
11.4. Remedies....................................... 38
11.5. Waiver of Jury Trial........................... 39
11.6. Severability................................... 39
11.7. Parties........................................ 39
11.8. Conflict of Terms.............................. 39
11.9. Governing Law.................................. 39
11.10. Notices........................................ 39
11.11. Section Titles................................. 41
11.12. Counterparts................................... 41
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<PAGE>
EXHIBIT A - FORM OF DEBENTURE
EXHIBIT B - FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT C - FORM OF OPINION OF COUNSEL
EXHIBIT D - FORM OF WARRANT
<PAGE>
SECURITIES PURCHASE AGREEMENT
-----------------------------
SECURITIES PURCHASE AGREEMENT, dated as of September __, 1996 between
NAL FINANCIAL GROUP INC., a Delaware corporation (the "Company") and MERRILL
LYNCH WORLD INCOME FUND, INC., and CONVERTIBLE HOLDINGS, INC. (together, with
their successors and assigns, the "Purchasers").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, upon the terms and conditions hereinafter provided, the
Company has agreed to issue and sell to the Purchasers or their designated
nominees, and the Purchasers have agreed to purchase from the Company, an
aggregate $5,000,000 principal amount of a Subordinated Convertible Debenture of
the Company in substantially the form attached hereto as Exhibit A (the
"Debenture") convertible into shares of Common Stock, $.15 par value, of the
Company (the "Common Stock") (the Debenture and the Common Stock are together
referred to herein as the "Securities").
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, it is agreed as follows:
1. DEFINITIONS
-----------
In addition to the defined terms appearing above, capitalized terms
used in this Agreement shall have (unless otherwise provided elsewhere in this
Agreement) the following respective meanings when used herein:
"Affiliate" shall mean, with respect to any Person, (i) each Person
that, directly or indirectly, owns or controls, whether of record or
beneficially, or as a trustee, guardian or other fiduciary, 5 percent or more of
the Stock having ordinary voting power in the election of directors of such
Person, (ii) each Person that controls, is controlled by or is under common
control with such Person or any Affiliate of such Person, or (iii) each of such
Person's officers, directors and general partners. For the purpose of this
definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise. For purposes of this definition the Purchasers shall not be deemed to
be an Affiliate of the Company or any of the Affiliates of the Company.
"Agreement" shall mean this Securities Purchase Agreement, including
all amendments, modifications and supplements hereto and
<PAGE>
any appendices, exhibits or schedules to any of the foregoing, and shall refer
to this Securities Purchase Agreement as the same may be in effect at the time
such reference becomes operative.
"Ancillary Agreements" shall mean the Debenture, Registration Rights
Agreement and any supplemental agreement, undertaking, instrument, document or
other writing executed by the Company or any of its Subsidiaries or by any of
their Stockholders as a condition to purchasing any of the Securities under this
Agreement or otherwise in connection herewith.
"Bartolini" shall mean Robert R. Bartolini, Chairman of the Board,
President and Chief Executive Officer of the Company.
"Board" shall mean the Company's Board of Directors.
"Business Day" shall mean any day that is not a Saturday, a Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
"Capital Lease" shall mean any obligation that is required to be
classified and accounted for as a capital lease on the face of a balance sheet
of such person prepared in accordance with GAAP; and the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP.
"Capital Expenditures" shall mean all payments for any fixed assets or
improvements (whether paid in cash or accrued as liabilities, and including, in
all events all amounts expended or capitalized under capital leases), including,
without limitation, computer software and computer software licenses, or for
replacements, substitutions or additions thereto, that have a useful life of
more than one year and which are required to be capitalized under GAAP.
"Charges" shall mean all Federal, state, county, city, municipal,
local, foreign or other governmental taxes at the time due and payable, levies,
assessments, charges, liens, claims or encumbrances upon or relating to (i) the
Obligations, (ii) the Company or any of its Subsidiaries' employees, payroll,
income or gross receipts, (iii) the Company or any of its Subsidiaries'
ownership or use of any of its assets, or (iv) any other aspect of the Company
or any of its Affiliates' business, in each case including any and all interest
and penalties.
"Closing Date" shall mean that date upon which the Closing occurs and
shall be a date agreed upon between the Company and the Purchasers and "Closing"
shall mean the moment on the Closing Date on which the purchase and sale of the
Securities is made.
"Conseco Director" shall mean the individual designated by Conseco,
Inc. to serve as a Director of the Company pursuant to
-2-
<PAGE>
the terms of a Stockholders' Agreement entered into as of April 23, 1996,
between the Company, Conseco, Inc. and certain affiliates of Conseco, Inc., for
only such time or times as this individual continues to serve as a Director of
the Company.
"Default" shall mean any event which, with the passage of time or
notice or both, would, unless cured or waived, become an Event of Default.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
(or any successor legislation thereto), as amended from time to time.
"ERISA Affiliate" shall mean, with respect to the Company, any trade or
business (whether or not incorporated) under common control with the Company and
which, together with the Company, are treated as a single employer under Section
414(b), (c), (m) or (o) of the IRC.
"ERISA Event" shall mean, with respect to the Company or any ERISA
Affiliate, (i) a Reportable Event with respect to a Title IV Plan or a
Multiemployer Plan; (ii) the withdrawal of the Company, any of its Subsidiaries
or any ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA
during a plan year in which it was a substantial employer, as defined in Section
4001(a)(2) of ERISA; (iii) the complete or partial withdrawal of the Company,
any of its Subsidiaries or any ERISA Affiliate from any Multiemployer Plan; (iv)
the filing of a notice of intent to terminate a Title IV Plan or the treatment
of a plan amendment as a termination under Section 4041 of ERISA; (v) the
institution of proceedings to terminate a Title IV Plan or Multiemployer Plan by
the PBGC; (vi) the failure to make required contributions to a Qualified Plan;
or (vii) any other event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan
or the imposition of any liability under Title IV of ERISA, other than PBGC
premiums due but not delinquent under Section 4007 of ERISA.
"Event of Default" shall have the meaning assigned to it in Section 9.1
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Financing Agreements" shall mean the following agreements, together
with the related documents thereto, in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, refunding, replacing or otherwise restructuring all or
any portion of the indebtedness under such agreement or any successor or
-3-
<PAGE>
replacement agreement and whether by the same or any other agent, lender or
group of lenders: Loan and Security Agreement between Congress Financial
Corporation and the Company, dated March 16, 1993; the Amended and Restated Loan
and Security Agreement between General Electric Capital Corporation and NAL
Acceptance Corporation ("NAC"), dated September 28, 1994; the Loan Purchase
Agreement between Fairfax Savings Bank and the Company, dated October 6, 1994;
the Participation Agreement between Fairfax Savings, FSB and NAC, dated December
14, 1993; the series of securitization transactions undertaken by the Company or
its subsidiaries, involving: (a) the Master Repurchase Agreement between
Greenwich Capital Financial Products, Inc. and Autorics, Inc., dated September
5, 1995; the Trust Agreement between Autorics II, Inc. and Wilmington Trust,
dated December 1, 1995; (b) Receivables Purchase Agreement among NAC, Autorics,
Inc. and Autorics, II dated as of March 8, 1996, Sales and Servicing Agreement
among NAL Auto Trust 1996-1, Autorics II, Inc., NAC and Bankers Trust Co. dated
as of March 8, 1996, Indenture between NAL Auto Trust 1996-1 and Bankers Trust
Co. dated as of March 8, 1996 and Trust Agreement between Autorics II, Inc. and
Wilmington Trust Co. dated as of March 8, 1996; and (c) Receivables Purchase
Agreement among NAC, Autorics, Inc. and Autorics, II dated as of June 17, 1996,
Sales and Servicing Agreement among NAL Auto Trust 1996-2, Autorics II, Inc.,
NAC and Bankers Trust Co. dated as of June 17, 1996, Indenture between NAL Auto
Trust 1996-2 and Bankers Trust Co. dated as of June 17, 1996 and Trust Agreement
between Autorics II, Inc. and Wilmington Trust Co. dated as of June 17, 1996;
Master Repurchase Agreement between Cargill Financial Services Corporation
("Cargill") and Autorics, Inc. dated as of May 1, 1996 and Annex to the Master
Repurchase Agreement (including related exhibits thereto); the Master Equipment
Lease Agreement between MITEL Financial Services and the Company, dated November
6, 1995; the Participation Agreement, dated February 25, 1993 between Fairfax
Savings, FSB and NAC for the Jackson loan portfolio; the Participation
Agreement, dated July 16, 1993, between Fairfax Savings Bank, FSB and NAC for
the Premier Bank portfolio; the Participation Agreement, dated December 14, 1993
between Fairfax Savings, FSB and NAC for the Williamette loan portfolio; the
Participation Agreement, dated April 6, 1994, between Fairfax Savings Bank, FSB
and NAC for the Premier Motors loan portfolio; the Participation Agreement,
dated May 31, 1994 between Fairfax Savings, FSB and NAC for the Park Finance of
Broward loan portfolio; the Participation Agreement, dated March 31, 1994
between Fairfax Savings, FSB and NAC for the DAIWA loan portfolio; the
Participation Agreement, dated May 3, 1995, between Fairfax Savings Bank, FSB
and NAC for the Medical Equipment Resources leases; the Participation Agreement,
dated February 22, 1995, between Fairfax Savings, FSB and NAC or the February
loan originations; Revolving Line of Credit with Berman Family Limited
Partnership for borrowing of up to $3,500,000 dated August 27, 1996.
-4-
<PAGE>
"Fiscal Year" shall mean the calendar year.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
"Governmental Authority" shall mean any nation or government, any state
or other political subdivision thereof, and any agency, department or other
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Indebtedness" of any Person shall mean (i) all indebtedness of such
Person for borrowed money (including, without limitation, reimbursement and all
other obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured), but not including accounts payable and
other obligations to trade creditors and normal operating expenses characterized
as liabilities incurred in the ordinary course of business, (ii) all obligations
evidenced by notes, bonds, debentures or similar instruments (except where such
instruments evidence repayment of amounts referred to in subparagraph (i)),
(iii) any Capital Lease involving an Obligation in excess of $250,000, and (iv)
in the case of the Company, the Obligations. Indebtedness shall not include
interest rate swaps, hedges, caps, collars or forward agreements.
"Investment Guidelines" shall have the meaning assigned to such term in
Section 8.3 hereof.
"IRC" shall mean the Internal Revenue Code of 1986, as amended, and any
successor thereto.
"IRS" shall mean the Internal Revenue Service, or any successor
thereto.
"Licenses" shall have the meaning assigned to such term in Section
5.18; individually a "License."
"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, Charge, claim, security interest,
easement or encumbrance, preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the Uniform Commercial Code as enacted in the jurisdiction of the
principal executive office of the Company; or comparable law of any such
jurisdiction).
-5-
<PAGE>
"Material Adverse Effect" shall mean any material adverse effect on the
business, assets, operations, or financial or other condition of the Company or
any of its Subsidiaries.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, and to which the Company, any of its Subsidiaries
or any ERISA Affiliate is obligated to make, or has made or been obligated to
make, contributions on behalf of participants who are employed by any of them.
"Obligations" shall mean any principal, interest, premium, penalties,
fees and other liabilities and obligations due under the documentation governing
any Indebtedness (including interest after the commencement of any bankruptcy,
insolvency, rehabilitation, liquidation, conservation, supervision or similar
proceedings).
"Parent" shall mean, as to any corporate entity, the Person who owns
100 percent of the capital stock of such entity.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"Pension Plan" shall mean an employee pension benefit plan, as defined
in Section 3(2) of ERISA (other than a Multiemployer Plan), which is not an
individual account plan, as defined in Section 3(34) of ERISA, and which the
Company, any of its Subsidiaries or, if a Title IV Plan, any ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.
"Permitted Encumbrances" shall mean the following encumbrances: (i)
Liens for taxes or assessments or other governmental charges or levies, either
not yet due and payable or to the extent that nonpayment thereof is permitted by
the terms of this Agreement; (ii) pledges or deposits securing obligations under
worker's compensation, unemployment insurance, social security or public
liability laws or similar legislation; (iii) pledges or deposits securing bids,
tenders, contracts (other than contracts for the payment of money) or leases to
which the Company or any of its Subsidiaries is a party as lessee made in the
ordinary course of business; (iv) deposits securing public or statutory
obligations of the Company or any of its Subsidiaries; (v) workers', mechanics,
suppliers', carriers', warehousemen's or other similar liens arising in the
ordinary course of business and securing indebtedness aggregating not in excess
of $250,000 at any time outstanding, not yet due and payable; (vi) deposits
securing or in lieu of surety, appeal or customs bonds in proceedings to which
the Company or any of its Subsidiaries is a party, provided that such deposits
could not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect; (vii) pledges or deposits effected by the Company or
any of its
-6-
<PAGE>
Subsidiaries as a condition to obtaining or maintaining any License of such
Person; (viii) any attachment or judgment lien, unless the judgment it secures
shall not, within 60 days after the entry thereof, have been discharged or
execution thereof stayed pending appeal, or shall not have been discharged
within 60 days after the expiration of any such stay; (ix) all Liens securing
Senior Indebtedness; and (x) zoning restrictions, easements, licenses, or other
restrictions on the use of real property or other minor irregularities in title
(including leasehold title) thereto, so long as the same do not materially
impair the use, value, or marketability of such real property, leases or
leasehold estates.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, public benefit corporation, entity or
government (whether Federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, body or
department thereof).
"Plan" shall mean an employee benefit plan, as defined in Section 3(3)
of ERISA, which the Company or any of its Subsidiaries maintains or makes or is
obligated to make contributions to on behalf of participants who are or were
employed by any of them.
"Qualified Plan" shall mean an employee pension benefit plan, as
defined in Section 3(2) of ERISA, which is intended to be tax-qualified under
Section 401(a) of the IRC, and which the Company, any of its Subsidiaries or any
ERISA Affiliate maintains or makes or is obligated to make contributions to on
behalf of participants who are or were employed by any of them.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement by and among the Company and the Purchasers dated as of the date
hereof and in substantially the form attached hereto as Exhibit B.
"Reserves" shall mean such reserves as may be established by the
Company or any of its Subsidiaries within the Company's Financials or as may
otherwise be required in accordance with GAAP.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Documents" shall mean all reports, schedules, forms, statements
and other documents filed with the SEC.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
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<PAGE>
"Senior Indebtedness" shall mean (i) all Indebtedness under the
Financing Agreements now existing or hereinafter incurred in accordance with the
terms thereof and whether fixed or contingent, (ii) all Indebtedness the
proceeds of which are used for the purchase and origination of automobile leases
and loans which provide the security for such Indebtedness now existing or
hereinafter incurred and whether fixed or contingent, (iii) all Indebtedness the
proceeds of which are used to finance the purchase of other financial
instruments and/or inventory including, without limitation, vehicles held for
lease or sale; and (iv) all other Indebtedness secured by purchase money
security interests whether perfected or unperfected, provided, however, that
Senior Indebtedness shall not include accounts payable and trade debt incurred
in the day-to-day operations of the Company.
"Stock" shall mean all shares, options, warrants, general or limited
partnership interests, participations or other equivalents (regardless of how
designated) of or in a corporation, partnership or equivalent entity whether
voting or nonvoting, including, without limitation, common stock, preferred
stock, or any other "equity security" (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the Securities and Exchange
Commission under the Exchange Act).
"Stockholders" shall mean, with respect to any Person, all of the
holders of Stock of such Person immediately following the Closing Date.
"Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of 50 percent or more of the outstanding Stock
(irrespective of whether, at the time, Stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person and/or one or more Subsidiaries of such
Person, and (b) any partnership in which such Person and/or one or more
Subsidiaries of such Person shall have an interest (whether in the form of
voting or participation in profits or capital contribution) of 50 percent or
more.
"Taxes" shall mean any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding taxes imposed on or measured by the net income of the
Purchasers by the jurisdictions under the laws of which the Purchasers are
organized or is engaged in business (other than by reason of the transactions
contemplated by this Agreement or the Ancillary Agreements) or any political
subdivision thereof.
"Title IV Plan" shall mean a Pension Plan, other than a Multiemployer
Plan, which is covered by Title IV of ERISA.
-8-
<PAGE>
"Transactions" shall mean the purchase and sale of the Securities as
described in the recitals to this Agreement, and all transactions related or
incidental thereto.
"Unfunded Pension Liability" shall mean, at any time, the aggregate
amount, if any, of the sum of (i) the amount by which the present value of all
accrued benefits under each Title IV Plan exceeds the fair market value of all
assets of such Title IV Plan allocable to such benefits in accordance with Title
IV of ERISA, all determined as of the most recent valuation date for each such
Title IV Plan using the actuarial assumptions in effect under such Title IV
Plan, and (ii) for a period of five (5) years following a transaction reasonably
likely to be covered by Section 4069 of ERISA, the liabilities (whether or not
accrued) that could be avoided by the Company, any of its Subsidiaries or any
ERISA Affiliate as a result of such transaction.
"Withdrawal Liability" shall mean, at any time, the aggregate amount of
the liabilities, if any, pursuant to Section 4201 of ERISA, and any increase in
contributions pursuant to Section 4243 of ERISA with respect to all
Multiemployer Plans.
Any accounting term used in this Agreement shall have, unless otherwise
specifically provided herein, the meaning customarily given such term in
accordance with GAAP and all financial computations hereunder shall be computed,
unless otherwise specifically provided herein, in accordance with GAAP
consistently applied and consistent with the Financials. That certain terms or
computations are explicitly modified by the phrase "in accordance with GAAP"
shall in no way be construed to limit the foregoing.
The words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole, including the Exhibits and Schedules
hereto, as the same may from time to time be amended, modified or supplemented
and not to any particular section, subsection or clause contained in this
Agreement. As used herein, the word "or" is not exclusive.
Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter.
2. THE PURCHASE OF SECURITIES
--------------------------
2.1. Sale and Purchase of Securities. (a) Subject to the terms and
conditions herein, on the Closing Date, the Purchasers agree to purchase from
the Company, and the Company agrees to issue and sell to the Purchasers,
Debentures for a total purchase price of $5,000,000 in such name or names as
Purchasers shall specify as nominees of the Purchasers (the "Nominees").
Schedule 2.1
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<PAGE>
attached hereto shall identify the nominees of the Purchasers. The Debenture
shall be in the forms attached hereto as Exhibit A. The Closing shall take place
in New York, New York, or such other place as agreed to among the parties, on
the Closing Date. On the Closing Date, the Company will deliver to Purchasers
the Debentures against delivery by the Purchasers of the purchase price to the
Company.
2.2. Use of Proceeds. The Company shall use the proceeds of the sale of
the Securities to purchase and originate automobile loans and leases and fund
working capital needs in connection with such purchases and originations and for
other purposes consistent with the principal business objectives of the Company
including those expenses identified at Section 11.2 hereof.
3. CONDITIONS PRECEDENT
--------------------
3.1. Conditions to the Purchase. Notwithstanding any other provision of
this Agreement and without affecting in any manner the rights of the Purchasers
hereunder, the Company shall have no rights under this Agreement (but shall have
all applicable obligations hereunder), and the Purchasers shall not be obligated
to make the purchases of the Securities hereunder, unless and until each of the
following conditions precedent shall have been fulfilled or waived by the
Purchasers, and the Company shall have delivered, where applicable, in form and
substance satisfactory to the Purchasers, and (unless otherwise indicated) each
dated the Closing Date:
(a) All of the representations and warranties of the Company contained
in this Agreement or in any of the Ancillary Agreements shall be correct in all
material respects as though made on and as of the Closing Date, except to the
extent that any such representation or warranties expressly relates to an
earlier date and for changes therein permitted or contemplated by this
Agreement.
(b) The Purchasers shall have received a written certification by the
principal financial officer of the Company as to the matters set forth in
Section 3.1(a) hereof.
(c) A favorable opinion of counsel for the Company substantially in the
form attached hereto as Exhibit C, it being understood that to the extent that
such opinion of counsel shall rely upon any other opinion of counsel, each such
other opinion shall be in form and substance satisfactory to the Purchasers and
shall provide that the Purchasers may rely thereon.
(d) Resolutions of the Board certified by the Secretary or Assistant
Secretary of the Company, to be dated, duly adopted and in full force and effect
as of the Closing Date, authorizing
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<PAGE>
(i) the consummation of the Transactions, and (ii) specific officers to execute
and deliver the Ancillary Agreements.
(e) Certificates of the secretary or an assistant secretary of the
Company, dated the Closing Date, as to the incumbency and signatures of the
officers or representatives of such entity executing this Agreement and the
Ancillary Agreements and any other certificates or other documents to be
delivered pursuant hereto or thereto, together with evidence of the incumbency
of such secretary or assistant secretary.
(f) Governmental certificates, dated the most recent practicable date
prior to the Closing Date, with telegram updates where available, showing that
each of the Company and its Subsidiaries is organized and in good standing in
the jurisdiction of its organization and is qualified as a foreign corporation
and in good standing in all other jurisdictions in which it is qualified to
transact business.
(g) Each consent, license and approval required in connection with (i)
the execution, delivery, performance, validity and enforceability of this
Agreement, the Ancillary Agreements, and the consummation of the Transactions
and (ii) the conduct by each of the Company and its Subsidiaries of its business
after the Closing Date; such consents, licenses and approvals shall be in full
force and effect and be satisfactory in form and substance to the Purchasers.
(h) A copy of the certificate of incorporation and all amendments
thereto of each of the Company, Autorics II, Inc., Autorics, Inc. and NAC and
copies of its bylaws all of which shall be certified by the secretary or
assistant secretary of each respective corporation as true and correct as of the
Closing Date.
(i) A certificate of the Chief Executive Officer of the Company,
satisfactory in form and substance to the Purchasers, stating that, as of the
Closing Date, no change has occurred in the business, assets, operating
properties, operations, prospects, financial or other condition of the Company
or any of its Subsidiaries since June 30, 1996, which would result in a Material
Adverse Effect.
(j) The Registration Rights Agreement.
(k) The Debentures.
(l) Common Stock Purchase Warrants for the purchase of 62,500 shares of
Common Stock of the Company (the "Warrants").
(m) Such additional information and materials as the Purchasers may
request.
-11-
<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
------------------------------------------------
The Purchasers, with respect to each Purchaser, individually and not
jointly, as to matters related to each respective Purchaser, make the following
representations and warranties to the Company, each and all of which shall
survive the execution and delivery of this Agreement and the Closing until the
date twenty-four months from the date hereof.
4.1 Organization. The Purchasers are corporations duly organized,
validly existing, and in good standing under the laws of the states of their
respective incorporation and each have full corporate power and authority to
enter into this Agreement and to perform its obligations hereunder.
4.2 Due Execution, Delivery and Performance of the Agreement. The
execution, delivery, and performance of this Agreement and any Ancillary
Agreement (i) have been duly authorized by all requisite corporate action by
each respective Purchaser, and (ii) will not violate the Certificate or Articles
of Incorporation or Bylaws of each respective Purchaser or any provision of any
material indenture, mortgage, agreement, contract, or other instrument to which
it is a party or by which it or any of its material properties or assets are
bound, or be in conflict with, result in a breach of or constitute (upon notice
or lapse of time or both) a default under any such indenture, mortgage,
agreement, contract, or other instrument. This Agreement is a legal, valid, and
binding obligation of each of the Purchasers enforceable against each respective
Purchaser in accordance with its terms.
4.3 Investment Representation. The Purchasers represent and warrant
that each respective Purchaser is purchasing the Debentures for their own
account, for investment purposes and not with a view to the distribution
thereof. The Purchasers agree that they will not, directly or indirectly, offer,
transfer, sell, assign, pledge, hypothecate or otherwise dispose of any of the
Securities (or solicit any offers to buy, purchase, or otherwise acquire or take
a pledge of any of the Securities), except in compliance with the Securities
Act, the rules and regulations thereunder and any applicable state securities
laws.
The Purchasers each recognize that investing in the Securities involves
a high degree of risk, and each Purchaser is in a financial position to hold the
Securities indefinitely and is able to bear the economic risk and withstand a
complete loss of its investment in the Securities. Each Purchaser is a
sophisticated investor and is capable of evaluating the merits and risks of
investing in the Company. The Purchasers acknowledge that they have been
provided with and reviewed copies of the Company's SEC Documents. The Purchasers
have had an opportunity to discuss the Company's business, management and
financial
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<PAGE>
affairs with the Company's management, have been given full and complete access
to information concerning the Company, and have utilized such access to its
satisfaction for the purpose of obtaining information or verifying information
and have had the opportunity to inspect the Company's operations. Purchasers
have had the opportunity to ask questions of, and receive answers from the
management of the Company (and, except for any of the Company's investment
bankers, any person acting on its behalf) concerning the Securities and the
terms and conditions of this Agreement and the agreements and transactions
contemplated hereby, and to obtain any additional information as the Purchasers
may have requested in making their investment decision. Each Purchaser is an
"accredited investor", as defined by Regulation D promulgated under the
Securities Act. Each Purchaser understands that the Securities have not been,
and will not be registered under the Securities Act by reason of their issuance
by the Company in a transaction exempt from the registration requirements of the
Securities Act; and that the Securities must be held by the Purchasers
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from registration.
4.4 Nominee Ownership. The Nominees are acting in connection with this
transaction as nominee of the Purchasers. The Purchasers shall remain, until and
unless an assignment occurs pursuant to Section 11.3, the beneficial owners of
the Debentures (as the term "beneficial ownership" is defined under applicable
federal securities laws).
Notwithstanding anything to the contrary in this Agreement, no
investigation by the Purchasers shall affect the representations and warranties
of the Company under this Agreement or contained in any document, certificate or
other writing furnished or to be furnished to Purchasers in connection with the
transactions contemplated hereby.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
To induce the Purchasers to purchase the Securities as herein provided,
the Company makes the following representations and warranties to the
Purchasers, each and all of which shall survive the execution and delivery of
this Agreement and the Closing until the date twenty-four months from the date
hereof:
5.1. Corporate Existence; Compliance with Law. Each of the Company and
its subsidiaries (i) is a corporation duly organized, validly existing and in
good standing under the laws of its state or country of incorporation; (ii) is
duly qualified to do business and is in good standing under the laws of each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification (except for jurisdictions in which such
failure to so qualify or to be in good standing would not
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<PAGE>
have a Material Adverse Effect); (iii) has the requisite corporate power and
authority and the legal right to own, pledge, mortgage or otherwise encumber and
operate its properties, to lease the property it operates under lease, and to
conduct its business as now, heretofore and proposed to be conducted; (iv) has
all material licenses, permits, consents or approvals from or by, and has made
all material filings with, and given all material notices to, all Governmental
Authorities having jurisdiction, to the extent required for such ownership,
operation and conduct (including, without limitation, the consummation of the
Transactions) (v) is in compliance with its certificate or articles of
incorporation, as applicable, and by-laws; and (vi) is in compliance with all
applicable provisions of law where the failure to comply would have a Material
Adverse Effect.
5.2. Executive Offices. The current location of the Company's and each
of its Subsidiaries' executive offices and principal place of business is set
forth on Schedule 5.2 hereto.
5.3. Subsidiaries. There currently exist, and upon consummation of the
Transactions there shall exist, no Subsidiaries of the Company other than as set
forth on Schedule 5.3 hereto, which sets forth such Subsidiaries, together with
their respective jurisdictions of organization, and the authorized and
outstanding capital Stock of each such Subsidiary, by class and number and
percentage of each class legally owned by the Company or a Subsidiary of the
Company or any other Person, or to be owned on the Closing Date. There are no
options, warrants, rights to purchase or similar rights covering capital Stock
of any such Subsidiary.
5.4. Corporate Power; Authorization; Enforceable Obligations. The
execution, delivery and performance by the Company of this Agreement and the
Ancillary Agreements and all instruments and documents to be delivered by the
Company: (i) are within the Company's and its Subsidiaries' corporate power;
(ii) have been, or by the Closing Date will be, duly authorized by all necessary
or proper corporate action; (iii) are not in contravention of any provision of
the Company's or its Subsidiaries' respective certificates or articles of
incorporation, as applicable, or by-laws; (iv) will not violate, in any material
respect, any law or regulation, including any and all Federal and state
securities laws, or any order or decree of any court or governmental
instrumentality; (v) except as set forth on Schedule 5.4, will not, in any
material respect, conflict with or result in the breach or termination of,
constitute a default under or accelerate any performance required by, any
indenture, mortgage, deed of trust, lease, agreement or other material
instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries or any of their property is bound;
and (vi) will not result in the creation or imposition of any Lien upon any of
the property of the Company
-14-
<PAGE>
or any of its Subsidiaries. Except as set forth on Schedule 5.4, no consent,
waiver or authorization of, or filing with, any Person (including, without
limitation, any Governmental Authority), which has not been obtained as of the
Closing Date is required in connection with the execution, delivery, performance
by, or validity of this Agreement or the Ancillary Agreements, except those
which the failure to obtain will not have a Material Adverse Effect. All such
consents, waivers, authorizations and filings, except as set forth on Schedule
5.4, have been obtained or made. On or prior to the Closing Date, each of this
Agreement and the Ancillary Agreements shall have been duly executed and
delivered for the benefit of or on behalf of the Company or its Subsidiaries, as
the case may be, and each shall then constitute a legal, valid and binding
obligation of the Company or its Subsidiaries, to the extent they are parties
thereto, enforceable against them in accordance with its terms.
5.5. SEC Documents. (i) The Company has filed all required reports,
schedules, forms, statements and other documents with the SEC since November 30,
1994 (such reports, schedules, forms, statements and other documents filed
and/or required to be filed are hereinafter referred to as the "SEC Documents");
(ii) as of their respective dates, the SEC Documents complied, in all material
respects, with the requirements of the Securities Act, or the Exchange Act, as
the case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents as of such dates
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and (iii) the consolidated financial statements of the Company
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Item 310 of Regulation S-B) and fairly
present the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited quarterly statements, to normal year-end audit adjustments).
5.6. Absence of Certain Changes or Events. Except as disclosed in the
SEC Documents filed and publicly available prior to the date of this Agreement
(the "Filed SEC Documents") or in Schedule 5.6 attached hereto, since June 30,
1996 (the date of the most recent financial statements included in the Filed SEC
Documents), the Company and its subsidiaries have conducted their
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<PAGE>
business only in the ordinary course, and there has not been (i) any change
which would have a Material Adverse Effect on the business, financial condition
or results of operations of the Company and its subsidiaries taken as a whole,
(ii) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of the
Company's outstanding capital stock, (iii) any split, combination or
reclassification of any of its outstanding capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of its outstanding capital stock, (iv) (x) any
granting by the Company or any of its subsidiaries to any executive officer or
other employee of the Company or any of its subsidiaries of any increase in
compensation, except in the ordinary course of business consistent with prior
practice or as was required under employment agreements in effect as of the date
of the most recent audited financial statements included in the Filed SEC
Documents, (y) any granting by the Company or any of its subsidiaries to any
such executive officer or other employee of any increase in severance or
termination pay, except in the ordinary course of business consistent with prior
practice or as was required under any employment, severance or termination
agreements in effect as of the date of the most recent audited financial
statements included in the Filed SEC Documents or (z) any entry by the Company
or any of its subsidiaries into any employment, severance or termination
agreement with any such executive officer or other employee or (v) any change in
accounting methods, principles or practices by the Company or any of its
subsidiaries materially affecting its assets, liability or business, except
insofar as may have been required by a change in generally accepted accounting
principles.
5.7. Intentionally Omitted.
5.8. Ownership of Property. (a) Except as disclosed in Schedule 5.8(a),
the Company and its Subsidiaries do not own any real property.
(b) All real property leased by the Company or any of its Subsidiaries
is set forth on Schedule 5.8(b). Each of such leases is valid and enforceable in
accordance with its terms and is in full force and effect. Except leases or real
property that is the subject of a security interest in favor of the Company,
neither the Company nor the applicable Subsidiary nor any other party to any
such lease is in default of its obligations thereunder or has delivered or
received any notice of default under any such lease, nor has any event occurred
which, with the giving of notice, the passage of time or both, would constitute
a default under any such lease, except for any default which would not have a
Material Adverse Effect.
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<PAGE>
5.9. No Default. Neither the Company nor any of its subsidiaries is in
default, nor to the knowledge of any of the Company or any of its subsidiaries
is any third party in default, under or with respect to any contract, agreement,
lease or other instrument, including, but not limited to, the Financing
Agreements, to which any of the Company or its Subsidiaries is a party, except
for any default which (either individually or collectively with other defaults
arising out of the same event or events) would not have a Material Adverse
Effect. No Default or Event of Default exists on the date hereof.
5.10. Employment Matters. Hours worked by and payments made to
employees of the Company or any of its Subsidiaries are not in violation of the
Fair Labor Standards Act or any other applicable law dealing with such matters
which would have a Material Adverse Effect. All payments due from the Company or
any of its Subsidiaries on account of employee health and welfare insurance
which would have a Material Adverse Effect if not paid have been paid or accrued
as a liability on the books of the Company or such Subsidiary.
5.11. Other Ventures. Except as set forth in the Filed SEC Documents or
on Schedule 5.11 hereto, neither the Company nor any of its Subsidiaries is
engaged in any joint venture or partnership with any other Person.
5.12. Taxes. Except as set forth on Schedule 5.12 hereto, all federal,
state, local and foreign tax returns, reports and statements required to be
filed (including, for all purposes of this Section 5.12, any filed or to be
filed on a consolidated, combined or unitary basis with any other company) by
each of the Company or any of its subsidiaries have been timely filed with the
appropriate Governmental Authority and such returns, reports and statements were
true, correct and complete in all material respects. All Charges and other
impositions due and payable have been paid prior to the date on which any fine,
penalty, interest or late charge may be added thereto for nonpayment thereof, or
any such fine, penalty, interest or late charge has been paid. Proper and
accurate amounts have been withheld by each of the Company and its Subsidiaries
from their respective employees for all periods in full and complete compliance
with the tax, social security and unemployment withholding provisions of
applicable federal, state, local and foreign law and such withholdings have been
timely paid to the respective Governmental Authorities. Except as set forth on
Schedule 5.12., no deficiency for any Charges has been proposed, asserted or
assessed against any of the Company or its subsidiaries by any federal, state,
local or foreign Governmental Authority; nor are any federal, state, local or
foreign tax audits or other administrative proceedings or court proceedings are
presently pending with regard to any Charges or tax returns of any of the
Company or its subsidiaries. Except as described in Schedule 5.12 hereto, none
of the Company or its subsidiaries has
-17-
executed or filed with the IRS or any other Governmental Authority any agreement
or other document extending, or having the effect of extending, the period of
time within which to file a tax return, report or statement which has not since
been filed or the period for assessment or collection of any Charges. None of
the Company or its subsidiaries has agreed or has been requested to or has an
application pending to make any adjustment under IRC Section 481(a) by reason of
a change in accounting method or otherwise. Except as set forth on Schedule 5.12
hereto, neither the Company nor any of its Subsidiaries is a party to, bound by
or has any obligation under any tax sharing or similar agreement or arrangement.
5.13. ERISA.
-----
(a) Schedule 5.13 lists all Plans maintained or contributed to by the
Company or any of its Subsidiaries and all Qualified Plans maintained or
contributed to by any ERISA Affiliate, and of those plans listed separately
identifies the Title IV Plans, Multiemployer Plans, unfunded Pension Plans and
welfare plans, as defined in Section 3(l) of ERISA, providing retiree benefits.
(b) Each Qualified Plan has been determined by the IRS to qualify under
Section 401 of the IRC, and the trusts created thereunder have been determined
to be exempt from tax under the provisions of Section 501 of the IRC, and to the
best knowledge of the Company nothing has occurred which would cause the loss of
such qualification or tax-exempt status.
(c) Each Plan set forth on Schedule 5.13 is in compliance in all
material respects with the applicable provisions of ERISA and the IRC, including
the filing of reports required under the IRC or ERISA which are true and correct
in all material respects as of the date filed, and with respect to each Plan,
other than a Qualified Plan, all required contributions and benefits, have been
paid in accordance with the provisions of each such Plan.
(d) None of the Company, its Subsidiaries or any ERISA Affiliate, with
respect to any Qualified Plan, has failed to make any contribution or pay any
amount due as required by Section 412 of the IRC or Section 302 of ERISA or the
terms of any such plan.
(e) Except as set forth on Schedule 5.13, no Title IV Plan has any
Unfunded Pension Liability.
(f) Except as set forth on Schedule 5.13, with respect to all Plans
which are welfare plans, as defined in Section 3(1) of ERISA, providing retiree
benefits the present value of future anticipated expenses pursuant to the latest
actuarial projections of liabilities does not exceed $100,000.
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(g) Except as set forth on Schedule 5.13, with respect to Pension
Plans, other than Qualified Plans, the present value of the liabilities for
current participants thereunder using reasonable interest assumptions does not
exceed $50,000.
(h) Except as set forth on Schedule 5.13, there has been no, nor is
there reasonably expected to occur any, ERISA Event or event described in
Section 4068 of ERISA with respect to any Title IV Plan.
(i) Except set forth on Schedule 5.13, there are no pending, or to the
knowledge of the Company or any of its Subsidiaries, threatened claims, actions
or lawsuits (other than claims for benefits in the normal course), asserted or
instituted against (i) any Plan or its assets, (ii) any fiduciary with respect
to any Plan or (iii) the Company, any of its Subsidiaries or any ERISA Affiliate
with respect to any Plan.
(j) Except as set forth on Schedule 5.13 none of the Company, any of
its Subsidiaries or any ERISA Affiliate has incurred or reasonably expects to
incur any Withdrawal Liability (and no event has occurred which, with the giving
of notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 of ERISA as a result of a complete or partial withdrawal from a
Multiemployer Plan.
(k) Except as set forth in Schedule 5.13, none of the Company, any of
its Subsidiaries or any ERISA Affiliate has engaged in a transaction which
resulted or could result in any liability under Section 4069 of ERISA.
(l) Except as set forth on Schedule 5.13, no plan which is a welfare
benefit plan, as defined in Section 3(1) of ERISA, provides for continuing
benefits or coverage for any participant or any beneficiary of a participant
after such participant's termination of employment (except as may be required by
Section 4980B of the IRC and at the sole expense of the participant or the
beneficiary of the participant) which would result in a liability in an amount
which would have a Material Adverse Effect. The Company, its Subsidiaries and
each ERISA Affiliate have complied with the notice and continuation coverage
requirements of Section 4980B of the IRC and the regulations thereunder, except
where the failure to comply would not result in any Material Adverse Effect.
(m) Neither the Company nor any of its Subsidiaries has engaged in a
prohibited transaction, as defined in Section 4975 of the IRC or Section 406 of
ERISA, in connection with any Plan, which would subject the Company or any of
its Subsidiaries (after giving effect to any exemption) to a material tax on
prohibited transactions imposed by Section 4975 of the IRC or any other material
liability.
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5.14. No Litigation. Except as set forth in the Filed SEC Documents or
on Schedule 5.14 hereto, no material action, claim or proceeding is now pending
or, to the knowledge of the Company or any of its subsidiaries, threatened
against any of the Company or any of its subsidiaries, at law, in equity or
otherwise, before any court, board, commission, agency or instrumentality of any
Federal, state, local or foreign government or of any agency or subdivision
thereof, or before any arbitrator or panel of arbitrators nor to the knowledge
of any of the Company or any of its subsidiaries does a state of facts exist
which is reasonably likely to give rise to such proceedings. None of the matters
set forth therein questions the validity of any of this Agreement or the
Ancillary Documents or any action taken or to be taken pursuant thereto, or
would have either individually or in the aggregate a Material Adverse Effect.
5.15. Employment and Labor Agreements. Except as set forth in the Filed
SEC Documents, there are no employment, consulting, servicing or management
agreements with respect to management of the Company or any of its Subsidiaries
and there are no collective bargaining agreements or other labor agreements
covering any employees of the Company or any of its Subsidiaries. A true and
complete copy of each such agreement has been furnished to the Purchasers.
5.16. Other Contracts. Schedule 5.16 attached hereto, the Filed SEC
Documents and the Financing Agreements, in the aggregate, identify each
agreement, contract, lease, sublease, promissory note or evidence of
indebtedness (whether written or oral) that involves the payment or potential
payment by or to the Company or any of its Subsidiaries of more than One Hundred
Thousand Dollars ($100,000) or that is otherwise individually material to the
business of the Company or such Subsidiary.
To the Company's knowledge, each of the agreements, contracts,
commitments, leases, plans and other instruments, documents and undertakings to
be listed in Schedule 5.16 in response to this Section is valid and enforceable
in accordance with its terms, except to the extent that (a) enforcement may be
limited by or subject to the principles of public policy and any bankruptcy and
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to or limited to creditors' rights generally and (b) the remedy
of specific performance and injunctive and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the court or
other similar entity before which any proceeding therefor may be brought. To the
knowledge of the Company, there does not exist any default by any third party to
any such agreement, contract, commitment, lease, plan or other instrument,
document or undertaking which default would have a Material Adverse Effect.
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5.17. Patents, Trademarks, Copyrights and Licenses. Each of the Company
and its Subsidiaries own all material licenses, patents, patent applications,
copyrights, service marks, trademarks, trademark applications, and trade names
necessary to continue to conduct its business as heretofore conducted, now
conducted and proposed to be conducted, each of which is listed on Schedule 5.17
hereto. To the knowledge of the Company, the Company and its Subsidiaries
conduct their respective businesses without infringement or claim of
infringement of any license, patent, copyright, service mark, trademark, trade
name, trade secret or other intellectual property right of others, except where
such infringement or claim of infringement would not have a Material Adverse
Effect. There is no infringement or claim of infringement by others of any
material license, patent, copyright, service mark, trademark, trade name, trade
secret or other intellectual property right of the Company or any of its
Subsidiaries.
5.18. Licenses. Schedule 5.18 attached hereto lists all of the
jurisdictions in which the Company or any of its Subsidiaries hold active
licenses, permits or authorizations to transact business (collectively, the
"Licenses"). Except as set forth on Schedule 5.18, no such License is the
subject of a proceeding for suspension or revocation or any similar proceedings
and to the Company's knowledge no such suspension or revocation has been
threatened by any licensing authority.
5.19. Capital Structure of the Company. The authorized capital stock of
the Company consists solely of 50,000,000 shares of common stock, par value $.15
per share, of which 7,002,815 shares are issued and outstanding as of September
10, 1996, and 10,000,000 shares of preferred stock, $1,000 par value, none of
which are outstanding. All of the issued and outstanding shares of capital stock
of the Company have been duly authorized, are not subject to preemptive rights
and were issued in full compliance with all federal, state and local laws, rules
and regulations. Except for conversion rights to purchase shares of Common Stock
issued to holders of convertible subordinated debentures of the Company, options
to purchase Common Stock and warrants to purchase Common Stock as set forth on
Schedule 5.19 hereto, the options issuable under the Company's Stock Option Plan
to purchase 628,500 shares of Common Stock and options to purchase 40,000 shares
of Common Stock granted to the directors of the Company, which have been
disclosed to the Purchasers by the Company, and in the SEC Documents there are
no outstanding or authorized subscriptions, options, warrants, calls,
commitments, agreements or arrangements of any kind relating to the issuance,
transfer, delivery or sale by the Company of any additional shares of capital
stock or other securities of the Company, including, but not limited to, any
right of conversion or exchange granted by the Company under any outstanding
security, agreement or other instrument. Except as set forth in Schedule 5.19
hereto, there are no authorized or
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outstanding voting agreements, voting trusts, proxies, stockholder agreements,
rights to purchase, transfer restrictions, or other similar arrangements with
respect to any of the capital stock of the Company except as identified within
the SEC Documents. Except with respect to its outstanding convertible debentures
and except as otherwise set forth on Schedule 5.19 hereto, there are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to the capital stock of the Company. Except as set forth on
Schedule 5.19, the Company has no indebtedness for dividends, interest or other
distributions declared or accumulated but unpaid with respect to any securities
of the Company. No Person has a claim arising out of a violation of any
preemptive rights of a stockholder of the Company, nor any claim based upon
ownership, repurchase or redemption of any shares of the Company's capital
stock.
5.20. Investment Company Act. The Company is not, and is not directly
or indirectly controlled by or acting on behalf of any Person which is, required
to register as an "investment company" under the Investment Company Act of 1940,
as amended.
5.21. Underwriting Guidelines. Each automobile loan originated or
purchased by the Company since May 22, 1995 which is reflected on the balance
sheet and included in the securitization pools of the Company at June 30, 1996
was originated or purchased in accordance with the Company's underwriting
guidelines with such exceptions which, in the aggregate, do not have a Material
Adverse Effect. The Company's current underwriting guidelines are contained in
Schedule 5.21. Since June 30, 1996, the Company has originated or purchased
automobile loans and leases in accordance with the underwriting guidelines
contained in Schedule 5.21 with such exceptions which, in the aggregate, do not
have a Material Adverse Effect.
5.22 Senior and Other Indebtedness. Schedule 5.22 identifies as of the
Closing Date all presently existing Senior Indebtedness of the Company and its
subsidiaries, and all of the Indebtedness of the Company other than Senior
Indebtedness that upon purchase of the Debentures will be pari pasu with the
Debentures.
6. FINANCIAL STATEMENTS AND INFORMATION
------------------------------------
6.1. Reports and Notices. The Company covenants and agrees that from
and after the Closing Date until such time as no amounts are owing under the
Debentures, it shall deliver to the Purchasers:
(a) SEC Documents; Reports; Notices:
-------------------------------
Within 10 days after the Company's issuance or receipt thereof,
copies of (v) the preliminary prospectus and the
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effective prospectus contained in any registration statement filed with the SEC
or any state securities law authority; (x) any annual, periodic or other reports
filed with the SEC; (y) any listing application filed with any stock exchange or
amendment thereof; and (z) each annual report and all other reports or
information, including proxy solicitations, which the Company shall from time to
time send to any of its stockholders.
(b) As soon as practicable, but in any event within two (2) Business
Days after the Company becomes aware of the existence of any Event of Default,
telephonic or telegraphic notice specifying the nature of such Event of Default
or development or information, including the expected effect thereof, which
notice shall be promptly confirmed in writing within five (5) Business Days.
7. AFFIRMATIVE COVENANTS
---------------------
The Company covenants and agrees that, unless the Purchasers shall
otherwise consent in writing, from and after the date hereof and until such time
as no amounts remain due and owing under the Debentures.
7.1. Payment of Principal and Interest. The Company will duly and
punctually pay principal of and interest on the Debentures in accordance with
the terms of the Debentures.
7.2. Notice of Default. When any event has occurred and is continuing
which is, or after notice or lapse of time or both would become, an Event of
Default (as defined in Section 9.1 herein), or if the holder of any other
evidence of Indebtedness of the Company or any Subsidiary gives any notice or
takes any other action with respect to a claimed default, the Company shall
immediately notify the Purchasers by telegram, telex or facsimile transmission
notice specifying such event within five days of its occurrence.
7.3. Maintenance of Existence and Conduct of Business. The Company
shall and shall cause each of its Subsidiaries to (a) do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, including, without limitation, all Licenses or similar qualifications
required by them to engage in their business in all jurisdictions in which they
are at the time so engaged; (b) continue to conduct its business substantially
as now conducted or as otherwise permitted hereunder; and (c) at all times
maintain, preserve and protect all of its trademarks and tradenames (if any),
and preserve all the remainder of its material property, in use or useful in the
conduct of its business and keep the same in good repair, working order and
condition (taking into consideration ordinary wear and tear) and from time to
time make, or cause to be made, all needful and proper repairs, renewals and
replacements, betterments and
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improvements thereto consistent with industry practices, so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times
7.4. Payment of Obligations. (a) Subject to subsection (b) below, the
Company shall and shall cause each of its Subsidiaries to pay and discharge or
cause to be paid and discharged all its Indebtedness, as and when due and
payable (including any applicable grace period).
(b) The Company and each of its Subsidiaries shall have the right to
pay the Indebtedness arising under Section 7.4(a) and in good faith contest, by
proper legal actions or proceedings, the validity or amount of such Indebtedness
or claims.
7.5. Books and Records. The Company shall and shall cause each of its
Subsidiaries to keep adequate records and books of account with respect to its
business activities, in which proper entries, reflecting all of their financial
transactions, are made in accordance with GAAP and on a basis consistent with
the Financials.
7.6. Litigation. The Company shall notify the Purchasers in writing,
promptly upon learning thereof, of any material litigation or administrative
proceeding commenced or threatened against the Company or any of its
Subsidiaries.
7.7. Insurance. Schedule 7.7 lists in summary form all insurance
maintained by the Company and its Subsidiaries. The Company shall and shall
cause each of its Subsidiaries to continue to maintain such insurance. The
Company shall and shall cause each of its Subsidiaries to pay all insurance
premiums payable by them.
7.8. Compliance with Law. The Company shall and shall cause each of its
Subsidiaries to comply, in all material respects, with all Federal, state and
local laws and regulations applicable to it, including, without limitation,
ERISA, those regarding the collection, payment and deposit of employees' income,
unemployment and social security taxes and those relating to insurance or
environmental matters, where the failure to comply would have a Material Adverse
Effect.
7.9. Agreements. The Company shall and shall cause each of its
Subsidiaries to perform, within all required time periods (after giving effect
to any applicable grace periods), all of its obligations and enforce all of its
rights under each material agreement to which it is a party. The Company shall
not and shall cause each of its Subsidiaries not to terminate or modify in any
manner adverse to any such party any provision of any such material agreement to
which it is a party except in the ordinary course of business, consistent with
past practice.
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7.10. Employee Plans. (a) With respect to other than a Multiemployer
Plan, for each Qualified Plan hereafter adopted or maintained by the Company,
any of its Subsidiaries or any ERISA Affiliate, the Company shall (i) be in
possession of, or cause its Subsidiaries or ERISA Affiliates to be in possession
of, determination letters from the IRS to the effect that such Qualified Plan is
qualified within the meaning of Section 401(a) of the IRC; and (ii) from and
after the adoption of any such Qualified Plan, cause such plan to be qualified
within the meaning of Section 401(a) of the IRC and to be administered in all
material respects in accordance with the requirements of ERISA and Section
401(a) of the IRC.
(b) With respect to each welfare benefit plan, as defined in Section
3(1) of ERISA, hereafter adopted or maintained by the Company, any of its
Subsidiaries or any ERISA Affiliate, the Company shall comply, in all material
respects, or cause its Subsidiaries or ERISA Affiliates to comply, in all
material respects with the notice and continuation coverage requirements of
Section 4980B of the IRC and the regulations thereunder.
(c) (i) Promptly and in any event within thirty (30) days after the
Company, any of its Subsidiaries or any ERISA Affiliate knows or has reason to
know that any ERISA Event has occurred, and (ii) promptly and in any event
within ten (10) days after the Company, any of its Subsidiaries or any ERISA
Affiliate knows or has reason to know that a request for a minimum funding
waiver under Section 412 of the IRC has been filed with respect to any Qualified
Plan, the Company shall furnish to the Purchasers a written statement of the
principal financial officer or other appropriate officer of the Company
describing such ERISA Event or waiver request and the action, if any, which the
Company, any of its Subsidiaries or any ERISA Affiliate proposes to take with
respect thereto and a copy of any notice filed with the PBGC or the IRS
pertaining thereto.
(d) Promptly and in any event within thirty (30) days after the filing
thereof by the Company, any of its Subsidiaries or any ERISA Affiliate, the
Company shall furnish to the Purchasers a copy of each annual report (Form 5500
Series, including Schedule B thereto) with respect to each Pension Plan, and
upon request by the Purchasers, with respect to any other Plan.
(e) Promptly and in any event within thirty (30) days after receipt
thereof, the Company shall furnish to the Purchasers a copy of any adverse
notice, determination letter, ruling or opinion the Company, any of its
Subsidiaries or any ERISA Affiliate received from the PBGC, DOL or IRS with
respect to any Qualified Plan.
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(f) Promptly and in any event within ten (10) Business Days after
receipt thereof, the Company shall furnish to the Purchasers a copy of any
correspondence the Company, any of its Subsidiaries or any ERISA Affiliate
receives from the plan sponsor (as defined by Section 4001(a)(10) of ERISA) of
any Multiemployer Plan concerning potential withdrawal liability of the Company,
any of its Subsidiaries or any ERISA Affiliate, or notice of any reorganization,
with respect to any Multiemployer Plan, together with a written statement of the
principal financial officer or other appropriate officer of the Company of the
action which the Company, any of its Subsidiaries or any ERISA Affiliate
proposes to take with respect thereto.
(g) Promptly and in any event within thirty (30) Business Days after
the adoption thereof, the Company shall furnish to the Purchasers notice of (i)
any amendment to a Title IV Plan which results in an increase in benefits or the
adoption of any new Title IV Plan, (ii) any amendment to a, or adoption of a
new, welfare benefit plan, as defined in Section 3(1) of ERISA, which the
Company or any of its Subsidiaries maintains, contributes or has an obligation
to contribute to, and which results in an increase in benefits for retirees or
new benefits for retirees, and (iii) any amendment to terminate a Title IV Plan
or treatment of a plan amendment as a termination under Section 4041 of ERISA.
(h) Promptly and in any event after receipt of written notice of
commencement thereof, the Company shall furnish to the Purchasers notice of any
action, suit or proceeding before any court or other governmental authority
affecting the Company, any of its Subsidiaries or any ERISA Affiliate with
respect to any Plan, except those which, in the aggregate, if adversely
determined could not have a Material Adverse Effect.
(i) Promptly and in any event within thirty (30) days after notice or
knowledge thereof, the Company shall furnish to the Purchasers notice that the
Company or any of its Subsidiaries, has become or may become subject to a
material tax on prohibited transactions imposed by Section 4975 of the IRC,
together with a copy of Form 5330.
7.11. Access. (a) The Company shall and shall cause each of its
Subsidiaries to allow the Purchasers and any of its officers, employees and/or
agents, upon reasonable notice (unless a Default or Event of Default has
occurred and is continuing, in which case no notice shall be required),
exercisable as frequently as the Purchasers (or representative thereof)
reasonably determines to be appropriate, during normal business hours (or at
such other times as may reasonably be requested by the Purchasers or
representative), confer with senior management of the Company and its
Subsidiaries, to inspect the properties and facilities of the Company or any of
its Subsidiaries and, at its own expense, to inspect, audit and make extracts
from all of the Company's or
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any of its Subsidiaries' records, files and books of account. The Company shall
obtain and deliver any document or instrument reasonably necessary for the
Purchasers (or representative), as any of them may reasonably request, to obtain
records from any service bureau maintaining records for the Company or any of
its Subsidiaries as any of the Purchasers may reasonably request. The Company
shall also maintain duplicate records or supporting documentation on media,
including, without limitation, computer tapes and discs owned by the Company or
any of its Subsidiaries.
(b) The Purchasers shall not use and shall cause to be kept
confidential any non-public information obtained pursuant to this Agreement and
pursuant to any access granted pursuant to Section 7.11(a) above and not
otherwise disclose such information to any third party or otherwise utilize such
information in a manner that is in violation of, or inconsistent with the
Company's insider trading policies as reasonably constituted from time to time,
except (i) as may be required in connection with the administration of matters
relating to this Agreement, (ii) as may be required in connection with the
enforcement of any rights of the Purchasers pursuant to this Agreement or any of
the Ancillary Agreements, or (iii) as may otherwise be required by law.
8. NEGATIVE COVENANTS
------------------
The Company covenants and agrees that, without the Purchasers' prior written
consent, from and after the date hereof and until the date that no amounts are
due and owing under the Debentures:
8.1. Mergers, Etc. Neither the Company nor any Subsidiary thereof,
shall directly or indirectly, by operation of law or otherwise, merge with,
consolidate with, acquire all or substantially all of the assets or capital
stock of, or otherwise combine with, any Person or form or acquire any
Subsidiary without the consent of the Board (inclusive of the Conseco Director
if , the Conseco Director is still at that time a director of the Company).
8.2. Investments; Loans and Advances. (a) Except as otherwise permitted
in this Agreement and except in connection with its purchases and originations
of sub-prime automobile loans and leases, the Company shall not, and shall not
permit any of its Subsidiaries, to make any investment in, or make or accrue
loans or advances of money to, any Person' provided, however, that the Company
and its Subsidiaries may make and own investments in (i) other business
corporations, partnerships, trusts or other entities in connection with business
transactions, acquisitions or business combinations that are approved by the
Board; (ii) marketable direct obligations issued or unconditionally guaranteed
by the United States of America or any agency thereof maturing within thirty
days from the date of acquisition thereof; (iii) commercial paper maturing no
more than thirty days from the date
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of creation thereof and at the time of their acquisition having the highest
rating obtainable from either Standard & Poor's Corporation or Moody's Investors
Service, Inc.; and (iv) certificates of deposit, maturing no more than thirty
days from the date of creation thereof, issued by commercial banks incorporated
under the laws of the United States of America, each having at the time of the
acquisition of any such certificate of deposit combined capital, surplus and
undivided profits of not less than $200,000,000 and a rating of "A" or better by
a nationally recognized rating agency (collectively the "Investment
Guidelines").
8.3. Indebtedness. Except as otherwise expressly permitted by this
Section 8.3 or by any other Section of this Agreement or upon unanimous vote of
the Company's Board of Directors, the Company shall not, nor shall it permit any
of its Subsidiaries to, create, incur, assume or permit to exist any
Indebtedness, whether recourse or nonrecourse, and whether superior, pari passu
or junior, except (i) Senior Indebtedness; (ii) lease payment obligations under
leases which the Company or such Subsidiary is not prohibited from entering into
under this Agreement; (iii) deferred taxes; and (iv) unfunded pension fund and
other employee benefit plan obligations and liabilities but only to the extent
they are permitted to remain unfunded under applicable law.
8.4. Liens. The Company shall not and shall not permit any of its
Subsidiaries to create or permit any Lien on any of its properties or assets
which would have a Material Adverse Effect except Permitted Encumbrances.
8.5. Capital Expenditures. The Company shall not and shall not permit
any of its Subsidiaries to make Capital Expenditures that, in the aggregate
shall exceed the amounts of such expenditures provided for in the business plan
or budget of the Company in effect from time to time for any Fiscal Year, or
individually, shall exceed $75,000 (unless such individual expenditures are
provided for in the Company's business plans or budgets, as in effect from time
to time), which are not approved by the Company's Board of Directors or
otherwise approved in advance in writing by the Purchasers.
8.6. Cancellation of Indebtedness. The Company shall not and shall not
permit any of its Subsidiaries to cancel any claim or debt owing to it, except
for reasonable consideration and in the ordinary course of business, consistent
with past practice.
8.7. ERISA. The Company shall not, directly or indirectly, and
shall not permit its Subsidiaries or any ERISA Affiliate to directly or
indirectly by reason of an amendment or amendments to, or the adoption of, one
or more Title IV Plans, permit the present value of all benefit liabilities, as
defined in
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Title IV of ERISA (using the actuarial assumptions utilized by the PBGC upon
termination of a plan), to exceed the fair market value of assets allocable to
such benefits, all determined as of the most recent valuation date for each such
Title IV Plan, by more than $100,000, or to increase such benefit liabilities to
the extent security must be provided to any Title IV Plan under Section
401(a)(29) of the IRC. Neither the Company nor any of its Subsidiaries shall
establish or become obligated to any new welfare benefit plan, as defined in
Section 3(1) of ERISA, or modify any existing welfare benefit plan, for
retirees, which would result in the present value of future liabilities under
any such plans to increase by more than $100,000. Except as set forth on
Schedule 5.13, neither the Company nor any of its Subsidiaries shall establish
or become obligated to any new unfunded Pension Plan, which would result in the
present value of future liabilities under any such plans to increase by more
than $100,000.
8.8. Tax Sharing. The Company shall not make any tax sharing or similar
payment to any Affiliate in excess of: (a) its separate state, local and/or
foreign income tax liability; plus (b) its pro rata share of the consolidated
Federal income tax liability as determined under Treas. Reg. (section)
1.1552-1(a)(1); plus (c) its pro rata share of any consolidated, combined or
unitary state, local and/or foreign income tax computed similarly as under
subparagraph (b).
8.9 Amendment of Certificate of Incorporation. The Company and each of
its Subsidiaries shall not amend its articles or certificate of incorporation or
organization without the consent of the Board (inclusive of the Conseco Director
if the Conseco Director is still at that time a director of the Company) and
shall not amend their certificate or articles of incorporation or by-laws in any
manner which would adversely affect the rights of the Purchasers.
8.10. Limitation on Dividends and Other Payment Restrictions. The
Company will not, and will not permit any Subsidiary to, create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction of any kind, other than those in existence immediately after the
Closing Date, on the ability any Subsidiary to (a) pay dividends or make any
other distribution on its capital stock, (b) pay any indebtedness owed to the
Company or any other Subsidiary, or (c) make loans or advances to the Company or
any other Subsidiary.
8.11. Employee Loans. Except automobile loans or leases entered into in
the ordinary course of business consistent with past practice, the Company shall
not and shall not permit any of its Subsidiaries to without the consent of its
Board of Directors make or accrue any loans or other advances of money to any
employee of the Company or any such Subsidiary.
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8.12. Transactions with Affiliates. (a) The Company shall not as
disclosed in the SEC Filed Documents and except for compensation arrangements
entered into with the consent of the independent members of the Company's Board
of Directors, (which shall include the Conseco Director if the Conseco Director
remains at that time a director of the Company) and shall not permit any of its
Subsidiaries to, enter into or be a party to any transaction with any Affiliates
of the Company except in the ordinary course of and pursuant to the reasonable
requirements of the Company's or such Subsidiary's business and upon fair and
reasonable terms that are no less favorable to the Company or such Subsidiary
than would be obtained at the time of such transaction in a comparable
arm's-length transaction with a Person not an Affiliate of the Company or such
Subsidiary and in any event only if such transaction is effected in accordance
with all applicable laws and regulations and is not in an amount in excess of
$100,000 or is approved by the Board inclusive of the Conseco Director
(provided, however, the Conseco Director remains at that time a director of the
Company).
8.13. Sales of Assets. The Company shall not and shall not permit any
of its Subsidiaries to sell, transfer, or otherwise dispose of any assets or
properties; provided, however, that the foregoing shall not prohibit (i) the
sale of assets in the ordinary course of business, consistent with past practice
at a value not less than fair market value as determined in good faith by the
Company; (ii) the sale of surplus or obsolete equipment and fixtures; and (iii)
transfers resulting from any casualty or condemnation of assets or properties.
9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
--------------------------------------
9.1. Events of Default. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder until the date no amounts remain outstanding under the
Debentures:
(a) The Company shall default in the payment of any interest
on any Debenture when it becomes due and payable, and such failure to pay
continues for a period of five days.
(b) The Company shall default in the payment of the Principal
of any Debenture when it becomes due and payable.
(c) The Company shall fail or neglect to perform, keep or
observe any of the provisions of Sections 6, 7 or 8 of this Agreement and the
same shall remain unremedied for a period ending on the first to occur of five
(5) days after the Company shall receive written notice of any such failure from
either Purchaser or fifteen (15) days after the Company shall become aware
thereof.
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(d) The Company shall fail or neglect to perform, keep or
observe any other provision of this Agreement or of any of the other Ancillary
Agreements and the same shall remain unremedied for a period ending on the first
to occur of ten (10) days after the Company shall receive written notice of any
such failure from either Purchaser or thirty (30) days after the Company shall
become aware thereof.
(e) A default shall occur under any other agreement, document
or instrument to which the Company or any Subsidiary thereof is a party or by
which the Company or such Subsidiary or any of the Company's or such
Subsidiary's property is bound, and such default (i) involves the failure to
make any payment (whether of principal, interest or otherwise) due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) in
respect of any Indebtedness of the Company or such Subsidiary in an aggregate
amount exceeding $100,000, or (ii) causes (or permits any holder of such
Indebtedness of a trustee to cause) such Indebtedness or a portion thereof in an
aggregate amount exceeding $100,000, to become due prior to its stated maturity
or prior to its regularly scheduled dates of payment.
(f) Any representation or warranty herein or in this Agreement
or any Ancillary Agreement or in any written statement pursuant thereto or
hereto, report, financial statement or certificate made or delivered to the
Purchasers by the Company or any of its Subsidiaries shall be untrue or
incorrect in any material respect, as of the date when made or deemed made, and
the same shall remain unremedied for a period ending on the first to occur of
five (5) days after the Company shall receive written notice of any such failure
from the Purchasers or fifteen (15) days after the Company shall become aware
thereof.
(g) The Company shall fail to make any principal or interest
payment with respect to any Senior Indebtedness when the same shall be due and
payable (including any applicable grace period), or any maturity date under the
Senior Indebtedness is accelerated.
(h) Any of the material assets of the Company or any of its
Subsidiaries thereof shall be attached, seized, levied upon or subject to a writ
or distress warrant, or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors of the Company or any of its
Subsidiaries and shall remain unstayed or undismissed for thirty (30)
consecutive days; or any Person other than the Company or such Subsidiary shall
apply for the appointment of a receiver, trustee or custodian for any of the
assets of the Company or such Subsidiary and such application shall remain
unstayed or undismissed for thirty (30) consecutive days; or the Company or such
Subsidiary shall have concealed, removed or permitted to be concealed or
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removed, any part of its property, with intent to hinder, delay or defraud its
creditors or any of them or made or suffered a transfer of any of its property
or the incurring of an obligation which may be fraudulent under any bankruptcy,
fraudulent conveyance or other similar law.
(i) A case or proceeding shall have been commenced against the
Company or any of its Subsidiaries in a court having competent jurisdiction
seeking a decree or order in respect of the Company or such Subsidiary (i) under
title 11 of the United States Code, as now constituted or hereafter amended, or
any other applicable federal, state or foreign bankruptcy or other similar law;
(ii) appointing a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) of the Company or such Subsidiary or of any
substantial part of its or their properties; or (iii) ordering the winding-up or
liquidation of the affairs of the Company or such Subsidiary and such case or
proceeding shall remain undismissed or unstayed for sixty (60) consecutive days
or such court shall enter a decree or order granting the relief sought in such
case or proceeding.
(j) The Company or any of its Subsidiaries shall (i) file a
petition seeking relief under title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable federal, state or
foreign bankruptcy or other similar law; (ii) consent to the institution of
proceedings thereunder or to the filing of any such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) of the Company or such
Subsidiary or of any substantial part of its properties; (iii) fail generally to
pay its debts as such debts become due; or (iv) take any corporate action in
furtherance of any such action.
(k) Final judgment or judgments (after the expiration of all
times to appeal therefrom) for the payment of money in excess of $100,000 in the
aggregate shall be rendered against the Company or any of its Subsidiaries and
the same shall not be (i) fully covered by insurance in accordance with Section
7.7 hereof, or (ii) vacated, stayed, bonded, paid or discharged for a period of
thirty (30) days.
(l) Any other event shall have occurred and be continuing,
including the revocation of any License or other material suspension of the
authority of the Company to conduct its business, which would have a Material
Adverse Effect, or which upon Notice or passage of time would have a Material
Adverse Effect, and either Purchaser shall have given the Company at least
twenty (20) days' notice thereof.
(m) With respect to any Plan, (i) a prohibited transaction
within the meaning of Section 4975 of the IRC or Section 406 of ERISA occurs
which in the reasonable determination
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of the Purchasers could result in direct or indirect liability to the Company or
any of its Subsidiaries, (ii) with respect to any Title IV Plan, the filing of a
notice to voluntarily terminate any such plan in a distress termination, (iii)
with respect to any Multiemployer Plan, the Company, any of its Subsidiaries or
any ERISA Affiliate shall incur any Withdrawal Liability, (iv) with respect to
any Qualified Plan, the Company, any of its Subsidiaries or any ERISA Affiliate
shall incur an accumulated funding deficiency or request a funding waiver from
the IRS, or (v) with respect to any Title IV Plan or Multiemployer Plan which
has an ERISA Event not described in clauses (ii) - (iv) hereof, in the
reasonable determination of the Purchasers there is a reasonable likelihood for
termination of any such plan by the PBGC; provided, however, that the events
listed in clauses (i) - (v) hereof shall constitute Events of Default only if
the liability, deficiency or waiver request of the Company, any of its
Subsidiaries or any ERISA Affiliate, whether or not assessed, exceeds $50,000,
in any case set forth in (i) through (v) above, or exceeds $100,000, in the
aggregate for all such cases.
(n) If the Company fails or refuses to register shares of
Common Stock issued or issuable to the Purchasers pursuant to the Registration
Rights Agreement.
(o) Bartolini shall cease to serve as the Chief Executive
Officer of the Company by reason of death, disability, termination or any other
reason and a replacement acceptable to the Purchasers has not been hired by the
Company within fifteen (15) days of such event; provided, however, that if
Bartolini dies and John T. Schaeffer is then the President and Chief Operating
Officer of NAC and an employee of the Company in good standing and so long as
John T. Schaeffer continues in such position, no Event of Default shall have
occurred.
9.2. Remedies.
--------
(a) If any Event of Default other than specified in Sections 9.1 (i) or
(j) shall have occurred and be continuing, the Purchasers shall have the right
to require full payment of the principal amount of the Debentures together with
all accrued and unpaid interest, and if any Event of Default specified in
Sections 9.1 (i) or (j) shall have occurred and be continuing, then the
principal amount of the Debentures together with all accrued and unpaid interest
shall be immediately due and payable without any further action by Purchasers.
(b) If an Event of Default specified in Section 9.1(n) shall have
occurred and be continuing (a "Triggering Event of Default"), Purchasers shall
be entitled following fifteen (15) days notice with a right to cure, to cause
the Company to redeem the Debenture in such amount as may be specified by the
Purchasers in a request
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delivered to the Company by the Purchasers, and the Company shall redeem such
Debenture, by paying to the holder thereof an amount equal to the market value
of the greatest number of shares of Common Stock into which the Debenture is
convertible. The market value and the maximum number of shares of Common Stock
into which the Debenture is convertible shall be determined using the higher of
the average of the closing prices of a share of Common Stock, as reported by the
principal stock exchange upon which shares of Common Stock are traded, for the
20 trading days prior to (i) the day of the public announcement of a Triggering
Event of Default or (ii) the day of the event giving rise to the to the
Triggering Event of Default. If the Common Stock is not listed for trading on a
nationally recognized stock exchange or on the NASDAQ System on the day before
the Triggering Event of Default, for purposes of determining the number of
shares of Common Stock issuable upon conversion of the Debentures and the
redemption price provided for in this Section 9.2(b), the market value of a
share of Common Stock shall be determined by reference to the closing price of a
share of Common Stock as reported by the NASDAQ/NMS on the date of this
Agreement.
10. SECURITIES LAW MATTERS
----------------------
10.1 Legends. Each certificate or instrument representing the
Securities shall bear a legend substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH
SECURITIES AND ANY SECURITIES OR SHARES ISSUED UPON CONVERSION THEREOF
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT.
11. MISCELLANEOUS
-------------
11.1. Press Releases. Except as required by applicable law, Purchasers
and the Company will not give notice to third parties or otherwise make any
public statement or releases concerning this Agreement or the transactions
contemplated hereby except for such written information as shall have been
approved in writing as to form and content by the other party, which approval
shall not be unreasonably withheld.
11.2. Expenses and Other Fees. The Company shall pay any and all
expenses of the Purchasers (including reasonable expenses of their counsel) in
connection with their decision to provide financing to the Company, the
preparation and review of this Agreement and Ancillary Agreements and the
consummation of the transactions in connection herewith, which expenses shall
not exceed the sum of $17,500.00. Except with respect to Sands
Brothers & Co., Ltd., who acted as a financial advisor to the
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<PAGE>
Company in connection with this Transaction, there will be no fees or
commissions due and owing by any of the parties hereto in connection with the
Transaction, to any broker, finder, agent, adviser or third party.
11.3. Assignment. The Company may not assign any of its rights, title,
interest, remedies, powers and duties hereunder. The Company hereby consents to
the Purchasers' assignments, at any time or times, of any of the Purchasers'
rights, title, interests, remedies, powers and duties hereunder. The Company
agrees that it will use its best efforts to assist and cooperate with the
Purchasers in any manner reasonably requested by the Purchasers to effect such
assignments.
11.4. Remedies. The Purchasers' rights and remedies under this
Agreement shall be cumulative and nonexclusive of any other rights and remedies
which the Purchasers may have under any other agreement, including without
limitation, the Ancillary Agreements, by operation of law or otherwise.
11.5. Waiver of Jury Trial. The parties hereto waive all right to trial
by jury in any action or proceeding to enforce or defend any rights under this
Agreement or the Ancillary Agreements.
11.6. Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
11.7. Parties. This Agreement and the other Ancillary Agreements shall
be binding upon, and inure to the benefit of, the successors of the Company, and
the successors and assigns of the Purchasers.
11.8. Conflict of Terms. Except as otherwise provided in this Agreement
or any of the Ancillary Agreements by specific reference to the applicable
provisions of this Agreement, if any provision contained in this Agreement is in
conflict with, or inconsistent with, any provision in any of the Ancillary
Agreements, the provision contained in this Agreement shall govern and control.
11.9. GOVERNING LAW. THIS AGREEMENT AND THE OBLIGATIONS ARISING
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS,
AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THE PURCHASERS
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<PAGE>
AND THE COMPANY AGREE TO SUBMIT TO PERSONAL JURISDICTION AND TO WAIVE ANY
OBJECTION AS TO VENUE IN THE FEDERAL OR STATE COURTS IN THE COUNTY OF NEW
CASTLE, STATE OF DELAWARE. SERVICE OF PROCESS ON THE COMPANY OR THE PURCHASERS
IN ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
ANCILLARY AGREEMENTS SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY AT THE ADDRESS
LISTED IN SECTION 11.09 HEREOF. NOTHING HEREIN SHALL PRECLUDE THE PURCHASERS OR
THE COMPANY FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION.
11.10. Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by another, or whenever any of the parties desires to give or serve upon
another any communication with respect to this Agreement, each such notice,
demand, request, consent, approval, declaration or other communication shall be
in writing and either shall be delivered in person with receipt acknowledged or
by registered or certified mail, return receipt requested, postage prepaid, or
telecopied and confirmed by telecopy answer back, addressed as follows:
(a) If to the Purchasers at:
Daniel Luchanski
Merrill Lynch Asset Management
800 Scudders Mill Road
Plainsboro, NJ 08536
(b) If to the Company at:
NAL Financial Group Inc.
500 Cypress Creek Road West, Suite 590
Fort Lauderdale, Florida 33309
Attention: Robert R. Bartolini, President
With a copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll Professional Corporation
Two Logan Square, 12th Floor
18th and Arch Streets
Philadelphia, Pennsylvania 19103
Telecopy Number: (215) 569-2066
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, or upon receipt if the same shall have been
telecopied and confirmed by telecopy answer back or three (3)
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<PAGE>
Business Days after the same shall have been deposited in the United States
mail. Failure or delay in delivering copies of any notice, demand, request,
consent, approval, declaration or other communication to the persons designated
above to receive copies shall in no way adversely affect the effectiveness of
such notice, demand, request, consent, approval, declaration or other
communication. Delivery of notices as provided herein shall be deemed to provide
notice to both Purchasers.
11.11. Section Titles. The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.
11.12. Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall, collectively and separately,
constitute one agreement.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
MERRILL LYNCH WORLD INCOME FUND, INC.
As one of the Purchasers
By:_____________________________
Name:___________________________
Title:__________________________
CONVERTIBLE HOLDINGS, INC.
As one of the Purchasers
By:_____________________________
Name:___________________________
Title:__________________________
NAL FINANCIAL GROUP INC.
As the Company
By:_____________________________
Robert R. Bartolini
Chief Executive Officer
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Subordinated Convertible Debenture
$2,250,000 Dated: September 12, 1996
FOR VALUE RECEIVED, the undersigned, NAL FINANCIAL GROUP INC., a
Delaware corporation ("Maker" or the "Company"), promises to pay to the order of
Bridge Rope & Co., ("Lender"), in immediately available funds at the office of
Lender at 800 Scudders Mill Road, Plainsboro, New Jersey 08536 or at such other
location as the holder hereof may designate from time to time, the principal
amount of $2,250,000 as set forth in a Securities Purchase Agreement by and
between Convertible Holdings, Inc. and Merrill Lynch World Income Fund, Inc. and
Maker, (the "Securities Purchase Agreement") to which this is attached and
incorporated therein, together with interest from the date hereof (computed on
the basis of a year of 360 days of twelve 30-day months) on the outstanding
principal balance, to be fixed at a rate equal to 10% per annum, for the period
commencing on September 12, 1996 and ending on September 11, 1998, and at a rate
equal to 9% per annum for the period commencing September 12, 1998 and ending on
the Maturity Date, in accordance with the following terms:
1. Terms of Repayment. Principal and all unpaid interest which accrues
thereon shall be payable in full upon twenty (20) days written notice of demand
by the Lender any time after September 12, 1998, such date upon which principal
and all unpaid interest shall be payable in full shall hereinafter be referred
to as the "Maturity Date". Interest on the outstanding principal balance of this
Debenture shall accrue at the rate of 10% per annum until September 11, 1998,
and thereafter interest shall accrue at the rate of 9% per annum until the
Maturity Date. Interest shall be due and payable at its rate of accrual on a
monthly basis, in arrears, on the last business day of each month, commencing
September 30, 1996, and continuing during the term hereof through the Maturity
Date. Except as set forth in section 7 hereof, Maker may not prepay or redeem
part or all of the principal due under this Debenture without the consent of
Lender.
2. Securities Purchase Agreement. This Debenture has been issued
pursuant to, and in conjunction with the Securities Purchase Agreement pursuant
to which Maker agreed to sell, and Lender agreed to purchase, the Debenture
evidenced by this instrument. The terms and provisions of the Securities
Purchase Agreement shall govern the terms and provisions of this Debenture and
any conflict between this Debenture and the Securities Purchase Agreement shall
be resolved by the Securities Purchase Agreement.
3. Transferability. This Debenture may not be offered for sale or sold,
or otherwise transferred in any transaction which would constitute a sale
thereof within the meaning of the Securities Act of 1933, as amended (the "1933
Act"), unless (i) such security has been registered for sale under the 1933 Act
and registered or qualified upon applicable state securities laws relating to
the offer and sale of securities; or (ii)
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<PAGE>
exemptions from the registration requirements of the 1933 Act and the
registration or qualification requirements of all such state securities laws are
available and, if requested in writing by Maker, the Maker shall have received
an opinion of counsel to the Holder reasonably satisfactory to Maker that the
proposed sale or other disposition of such securities may be effected without
registration under the 1933 Act and would not result in any violation of any
applicable state securities laws relating to the registration or qualification
of securities for sale, such opinion to be reasonably satisfactory to counsel to
Maker.
4. Subordination. The indebtedness evidenced by this Debenture is
subordinated to the prior payment when due of the principal of, premium, if any,
and interest on all "Senior Indebtedness" (as defined in the Securities Purchase
Agreement) of Maker. Therefore, upon any distribution of its assets in a
liquidation or dissolution of Maker, or in bankruptcy, reorganization,
insolvency, receivership or similar proceedings relating to Maker, Lender will
not be entitled to receive payment of the indebtedness evidenced by this
Debenture until the holders of Senior Indebtedness are paid in full. Upon the
occurrence of an "Event of Default" with respect to any Senior Indebtedness, as
such Event of Default may be defined in such instrument evidencing the Senior
Indebtedness, to the extent such Event of Default permits the holders of such
Senior Indebtedness to accelerate the maturity thereof, then upon written notice
thereof given to Maker by any holder of such Senior Indebtedness or their
representative, no payment shall be made by Maker in respect of this Debenture
until Maker has cured such Event of Default to the satisfaction of the holders
of such Senior Indebtedness; provided, however, that in the event such Senior
Indebtedness has not been accelerated within 30 days from the date of such
notice, the Maker shall resume all payments required to be made pursuant to the
terms of this Debenture.
5. Remedies and Events of Default. An Event of Default under this
Debenture shall occur under the circumstances identified in Section 9.1 of the
Securities Purchase Agreement. Upon the occurrence of an Event of Default,
Lender may exercise those remedies identified in section 9.2 of the Securities
Purchase Agreement.
6. Conversion Feature. The unpaid principal of this Debenture is
convertible at the option of the Lender, in whole or in part, at any time until
the Maturity Date, upon surrender of this Debenture at the principal office of
the Company, into restricted shares of the Maker's Common Stock at a conversion
price ("Conversion Price") equal to the lesser of: (i) 80% of the closing bid
price of the Company's Common Stock as reported by The NASDAQ Stock Market (or
the principal exchange upon which the Company's Common Stock trades) on the date
of conversion of the Debenture; or (ii) $12.00 per share. Upon such conversion,
all principal due under this Debenture shall be discharged and the Company
released from all obligations thereunder, however, accrued interest shall be
paid to the date of conversion. The conversion price of the Debenture may be
subject to adjustment in the manner provided at Paragraph 8.
7. Redemption. Commencing September 12, 1998, this Debenture is subject
to redemption by the Company at any time thereafter at the principal amount,
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<PAGE>
plus any accrued and unpaid interest, on 30 days written notice provided that:
(i) the average of the closing bid prices of the Company's Common Stock as
reported by The NASDAQ Stock Market (or the principal exchange upon which the
Company's Common Stock trades) exceeds $25.00 per share for the 60 consecutive
trading days ending within 15 days of the Notice of Redemption; and (ii) the
resale of the shares of Common Stock issuable upon conversion of the Debenture
have been included within a Registration Statement declared effective by the
Securities and Exchange Commission. All Debentures must be redeemed if any are
redeemed.
8. Adjustments. The number of shares issuable to the Lender upon
conversion of this Debenture is subject to adjustment from time to time as
follows:
8.1. Reorganization, Merger or Sale of Assets. If at any time while
this Debenture, or any portion thereof, is outstanding there shall be (i) a
reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation with or into another corporation in which the Company is not the
surviving entity, or a reverse triangular merger in which the Company is the
surviving entity but the shares of the Company's capital stock outstanding
immediately prior to the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise, or (iii) a sale
or transfer of the Company's properties and assets as, or substantially as, an
entirety to any other person, then, as a part of such reorganization, merger,
consolidation, sale or transfer, lawful provision shall be made so that the
holder of this Debenture shall thereafter be entitled to receive upon conversion
of the Debentures the number of shares of stock or other securities or property
of the successor corporation resulting from such reorganization, merger,
consolidation, sale or transfer that a holder of the shares deliverable upon
conversion of this Debenture would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if this Debenture had
been converted immediately before such reorganization, merger, consolidation,
sale or transfer, all subject to further adjustment as provided in this Section
8. The foregoing provisions of this Section 8.1 shall similarly apply to
successive reorganizations, consolidations, mergers, sales and transfers and to
the stock or securities of any other corporation that are at the time receivable
upon the conversion of this Debenture. If the per-share consideration payable to
Lender for shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such consideration shall
be determined in good faith by the Company's Board of Directors. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Debenture
with respect to the rights and interests of Lender after the transaction, to the
end that the provisions of this Debenture shall be applicable after that event,
as near as reasonably may be, in relation to any shares or other property
deliverable after that event upon conversion of this Debenture.
8.2. Reclassification. If the Company, at any time while this
Debenture, or any portion thereof, remains outstanding, by reclassification of
securities or otherwise, shall change any of the securities as to which
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<PAGE>
conversion rights under this Debenture exist into the same or a different number
of securities of any other class or classes, this Debenture shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities that
were subject to the conversion rights under this Debenture immediately prior to
such reclassification or other change and the Conversion Price or number of
shares received upon such conversion shall be appropriately adjusted, all
subject to further adjustment as provided in this Section 8.
8.3. Split, Subdivision or Combination of Shares. If the Company at
any time while this Debenture, or any portion thereof, remains outstanding shall
split, subdivide or combine the securities as to which conversion rights under
this Debenture exist, into a different number of securities of the same class,
the number of shares issuable upon conversion shall be proportionately decreased
in the case of a split or subdivision or proportionately increased in the case
of a combination.
8.4. Adjustments for Dividends in Stock or Other Securities or
Property. If while this Debenture, or any portion hereof, remains outstanding
and unexpired the holders of the securities as to which conversion rights under
this Debenture exist at the time shall have received, or, on or after the record
date fixed for the determination of eligible stockholders, shall have become
entitled to receive, without payment therefor, other or additional stock or
other securities or property (other than cash) of the Company by way of
dividend, then and in each case, this Debenture shall represent the right to
acquire upon conversion, in addition to the number of shares of the security
receivable upon conversion of this Debenture, and without payment of any
additional consideration therefor, the amount of such other or additional stock
or other securities or property (other than cash) of the Company that such
holder would hold on the date of such conversion had it been the holder of
record of the security receivable upon conversion of this Debenture on the date
hereof and had thereafter, during the period from the date hereof to and
including the date of such conversion, retained such shares and/or all other
additional stock, other securities or property available by this Debenture as
aforesaid during such period, giving effect to all adjustments called for during
such period by the provisions of this Section 8.
8.5. Issuance of Shares Below Conversion Price.
(a) If while this Debenture, or any portion hereof, remains
outstanding, the Company shall offer and sell Additional Shares of Common Stock
(as hereinafter defined) for consideration per share less than the Conversion
Price in effect immediately prior to the issuance of such Additional Shares of
Common Stock, the Conversion Price in effect immediately prior to each such
issuance shall forthwith be adjusted upon such issuance to a price equal to the
price paid per share for such Additional Shares of Common Stock.
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<PAGE>
(b) For the purpose of the calculations provided in this
Section 8.5, if at any time or from time to time after the date hereof the
Company shall issue any rights or options for the purchase of, or stock or other
securities convertible into, Additional Shares of Common Stock (such Common
Stock or securities being hereinafter referred to as "Convertible Securities"),
then, and in each case, if the Effective Price (as hereinafter defined) of such
rights, options or Convertible Securities shall be less than the Conversion
Price, the Company shall be deemed to have issued at the time of the issuance of
such rights or options or Convertible Securities the maximum number of
Additional Shares of Common Stock issuable upon exercise or conversion thereof
and to have received as consideration for the issuance of such shares an amount
equal to the total amount of the consideration, if any, payable to the Company
upon exercise or conversion of such options or rights. "Effective Price" shall
mean the quotient determined by dividing the total of all of such consideration
by such maximum number of Additional Shares of Common Stock. No further
adjustment shall be made as a result of the actual issuance of Additional Shares
of Common Stock on the exercise of any such rights or options or the conversion
of any such Convertible Securities. In the case of Convertible Securities which
have a conversion price which is based, in whole or in part, upon a discount to
the market price or value of the Common Stock, then for the purposes of
calculating the Effective Price, the consideration shall be deemed to include
the minimum conversion price payable to the Company.
If any such rights or options or the conversion privilege
represented by any such Convertible Securities shall expire prior to the
Maturity hereof without having been exercised, the adjustment to the number of
shares available hereunder upon the issuance of such rights, options or
Convertible Securities shall be readjusted to the number of shares that would
have been in effect had an adjustment been made on the basis that the only
Additional Shares of Common Stock so issued were the Additional Shares of Common
Stock, if any, actually issued or sold on the exercise of such rights or options
or rights of conversion of such Convertible Securities, and such Additional
Shares of Common Stock, if any, were issued or sold for the consideration
actually received by the Company for the granting of all such rights or options,
whether or not exercised, plus the consideration received for issuing or selling
the Convertible Securities actually converted plus the consideration, if any,
actually received by the Company on the conversion of such Convertible
Securities.
(c) For the purpose of the calculations provided for in this
Section 8.5, if at any time or from time to time after the date hereof the
Company shall issue any rights or options for the purchase of Convertible
Securities, then, in each such case, if the Effective Price thereof is less than
the then Conversion Price, the Company shall be deemed to have issued at the
time of the issuance of such rights or options the maximum number of Additional
Shares of Common Stock issuable upon conversion of the total amount of
Convertible Securities covered by such rights or options and to have received as
consideration for the issuance of such Additional Shares of Common Stock an
amount equal to the amount of consideration, if any, received by the Company for
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the issuance of such rights or options, plus the consideration, if any, payable
to the Company upon the conversion of such Convertible Securities. "Effective
Price" shall mean the quotient determined by dividing the total amount of such
consideration by such maximum number of Additional Shares of Common Stock. No
further adjustment of such Conversion Price adjusted upon the issuance of such
rights or options shall be made as a result of the actual issuance of the
Convertible Securities upon the exercise of such rights or options or upon the
actual issuance of Additional Shares of Common Stock upon the conversion of such
Convertible Securities.
The provisions of subsection (b) above for readjustment upon
the expiration of rights or options or the rights of conversion of Convertible
Securities, shall apply mutatis mutandis to the rights, options and Convertible
Securities referred to in this subsection (c).
(d) The term "Additional Shares of Common Stock" as used
herein shall mean all shares of Common Stock issued or deemed issued by the
Company after the date hereof, other than (i) securities issued pursuant to or
in connection with the terms of the Securities Purchase Agreement dated of even
date herewith, by and among the Company and Merrill Lynch World Income Fund,
Inc. and Convertible Holdings, Inc.; (ii) shares of Common Stock issued upon
conversion of convertible securities or the exercise of common stock purchase
warrants outstanding as of the date hereof; (iii) shares of Common Stock
issuable to employees, officers or directors pursuant to the Company's stock
option plan; (iv) shares of Common Stock issued or issuable to directors in
connection with their service as directors; (v) shares of Common Stock issued or
issuable to directors, officers or employees for services rendered or to be
rendered pursuant to arrangements approved by the Board of Directors; and (vii)
shares of Common Stock issued in connection with a business combination, merger,
consolidation, asset acquisition or the acquisition of the business of another
corporation (through the purchase of stock or assets) approved by the Board of
Directors.
8.6. No Impairment. Maker will not, by any voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by Maker, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 8 and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of Lender against impairment.
9. Investment Intent. Lender, by acceptance hereof, acknowledges that
this Debenture and the shares to be issued upon conversion hereof are being
acquired solely for Lender's own account and not as a nominee for any other
party, and for investment, and that Lender will not offer, sell or otherwise
dispose of this Debenture or any shares to be issued upon conversion hereof
except under circumstances that will not result in a violation of applicable
federal and state securities laws. Upon exercise of this Debenture, Lender
shall, if requested by Maker, confirm in writing, in a form satisfactory to
Maker, that the shares so purchased are being acquired solely for Lender's own
account and not as a nominee for any other party, for investment, and not with a
view toward distribution or resale.
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All shares issued upon exercise hereof shall be stamped or imprinted
with a legend in substantially the following form (in addition to any legend
required by state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SECURITIES AND ANY
SECURITIES OR SHARES ISSUED UPON CONVERSION THEREOF MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT.
10. Reservation of Shares. Maker covenants that during the term that
this Debenture is outstanding, Maker will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of the shares upon the conversion of this Debenture, from time to time, will
take all steps necessary to amend its Certificate of Incorporation (the
"Certificate") to provide sufficient reserves of shares of Common Stock issuable
upon the conversion of the Debenture. Maker further covenants that all shares
that may be issued upon the conversion of this Debenture and payment of the
Conversion Price, all as set forth herein, will be free from all taxes, liens
and charges in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously or otherwise specified herein). Maker
agrees that its issuance of this Debenture shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the shares upon the conversion
of this Debenture.
11. Notices.
(a) Whenever the number of shares issuable or the Conversion Price
hereunder shall be adjusted pursuant to Section 8 hereof, the Company shall
issue a certificate signed by its Chief Financial Officer setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the
Conversion Price and number of shares purchasable hereunder after giving effect
to such adjustment, and shall cause a copy of such certificate to be mailed (by
first-class mail, postage prepaid) to Lender.
(b) All notices, advices and communications under this Debenture
shall be deemed to have been given, (i) in the case of personal delivery, on the
date of such delivery and (ii) in the case of mailing, on the third business day
following the date of such mailing, addressed as follows:
If to Maker:
NAL Financial Group Inc.
500 Cypress Creek Road West, Suite 590
Ft. Lauderdale, FL 33309
Attention: Robert R. Bartolini, President
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With a Copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll, Professional Corporation
1200 Two Logan Square
18th and Arch Streets
Philadelphia, PA 19103-2771
and to the Lender:
at the address of the Lender appearing on the
books of the Company or the Company's
transfer agent, if any.
Either of Maker or Lender may from time to time change the address to
which notices to it are to be mailed hereunder by notice in accordance with the
provisions of this Section 11.
12. Registration Rights. Lender shall be entitled to the registration
rights set forth in a certain Registration Rights Agreement of even date
herewith by and between Maker and Lender.
13. Amendments.
(a) Any term of this Debenture may be amended with the written
consent of the Company and the Holder. Any amendment effected in accordance with
this Section 13 shall be binding upon the Holder, each future holder and the
Company.
(b) No waivers of, or exceptions to, any term, condition or
provision of this Debenture, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such term, condition
or provision.
14. Agreements of Maker. Maker and any other party now or hereafter
liable for the payment of this Debenture in whole or in part, hereby severally
(i) waive demand, presentment for payment, notice of nonpayment, protest, notice
of protest, notice of intent to accelerate, notice of acceleration and all other
notice, filing of suit and diligence in collecting this Debenture, (ii) agree to
the release of any party primarily or secondarily liable hereon, (iii) agree
that the Lender shall not be required first to institute suit or exhaust its
remedies hereon against Maker or others liable or to become liable hereon or to
enforce its rights against them, and (iv) consent to any extension or
postponement of time of payment of this Debenture and to any other indulgence
with respect hereto without notice thereof to any of them.
15. Binding Parties. This Debenture shall bind Maker and its successors
and assigns, and the benefits hereof shall inure to the benefit of Lender and
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its successors and assigns. All references herein to "Maker" and "Lender" shall
be deemed to apply to Maker and Lender, respectively, and to their respective
successors and assigns.
16. Governing Law. The corporate law of the State of Delaware shall
govern all issues and questions concerning the relative rights of the Company
and its stockholders. All other questions concerning the construction, validity,
interpretation and enforceability of this Debenture and the exhibits and
schedules hereto shall be governed by, and construed in accordance with, the
laws of the State of Delaware, without giving effect to any choice of law or
conflict of law rules or provisions (whether of the State of Delaware or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
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17. Jurisdiction. The Lender and the Maker agree to submit to personal
jurisdiction and to waive any objection as to venue in the federal or state
courts in the County of New Castle, State of Delaware. Service of process on the
Maker or the Lender in any action arising out of or relating to this Debenture
shall be effective if mailed to such party at the address listed in Section 11
hereof.
18. Section Titles. The Section titles in this Debenture are and shall
be without substantive meaning or content of any kind whatsoever and are not a
part of this Debenture.
WITNESS the due execution hereof on the date first above written with
the intention that this Debenture shall constitute a sealed instrument.
NAL FINANCIAL GROUP INC.
By: (Seal)
-----------------------------------------
Robert R. Bartolini
Chief Executive Officer
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NOTICE OF CONVERSION
TO: NAL FINANCIAL GROUP INC.
(1) The undersigned hereby elects to purchase _______ shares of Common
Stock of NAL FINANCIAL GROUP INC. pursuant to the terms of the attached
Debenture, and tenders herewith payment of the purchase price for such shares in
full.
(2) In converting this Debenture, the undersigned will not offer, sell
or otherwise dispose of any such shares of Common Stock except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws.
(3) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
--------------------------------
(Name)
---------------------------------
(Name)
(4) Please issue a new Debenture for the unexercised portion of the
attached Debenture in the name of the undersigned or in such other name as is
specified below:
---------------------------------
(Name)
- ------------------ ---------------------------------
(Date) (Signature)
11
Subordinated Convertible Debenture
$2,750,000 Dated: September 12, 1996
FOR VALUE RECEIVED, the undersigned, NAL FINANCIAL GROUP INC., a
Delaware corporation ("Maker" or the "Company"), promises to pay to the order of
Kane & Co., ("Lender"), in immediately available funds at the office of Lender
at 800 Scudders Mill Road, Plainsboro, New Jersey 08536 or at such other
location as the holder hereof may designate from time to time, the principal
amount of $2,750,000 as set forth in a Securities Purchase Agreement by and
between Convertible Holdings, Inc. and Merrill Lynch World Income Fund, Inc. and
Maker, (the "Securities Purchase Agreement") to which this is attached and
incorporated therein, together with interest from the date hereof (computed on
the basis of a year of 360 days of twelve 30-day months) on the outstanding
principal balance, to be fixed at a rate equal to 10% per annum, for the period
commencing on September 12, 1996 and ending on September 11, 1998, and at a rate
equal to 9% per annum for the period commencing September 12, 1998 and ending on
the Maturity Date, in accordance with the following terms:
1. Terms of Repayment. Principal and all unpaid interest which accrues
thereon shall be payable in full upon twenty (20) days written notice of demand
by the Lender any time after September 12, 1998, such date upon which principal
and all unpaid interest shall be payable in full shall hereinafter be referred
to as the "Maturity Date". Interest on the outstanding principal balance of this
Debenture shall accrue at the rate of 10% per annum until September 11, 1998,
and thereafter interest shall accrue at the rate of 9% per annum until the
Maturity Date. Interest shall be due and payable at its rate of accrual on a
monthly basis, in arrears, on the last business day of each month, commencing
September 30, 1996, and continuing during the term hereof through the Maturity
Date. Except as set forth in Section 7 hereof, Maker may not prepay or redeem
part or all of the principal due under this Debenture without the consent of
Lender.
2. Securities Purchase Agreement. This Debenture has been issued
pursuant to, and in conjunction with the Securities Purchase Agreement pursuant
to which Maker agreed to sell, and Lender agreed to purchase, the Debenture
evidenced by this instrument. The terms and provisions of the Securities
Purchase Agreement shall govern the terms and provisions of this Debenture and
any conflict between this Debenture and the Securities Purchase Agreement shall
be resolved by the Securities Purchase Agreement.
3. Transferability. This Debenture may not be offered for sale or sold,
or otherwise transferred in any transaction which would constitute a sale
thereof within the meaning of the Securities Act of 1933, as amended (the "1933
Act"), unless (i) such security has been registered for sale under the 1933 Act
and registered or qualified upon applicable state securities laws relating to
the offer and sale of securities; or (ii)
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exemptions from the registration requirements of the 1933 Act and the
registration or qualification requirements of all such state securities laws are
available and, if requested in writing by Maker, the Maker shall have received
an opinion of counsel to the Holder reasonably satisfactory to Maker that the
proposed sale or other disposition of such securities may be effected without
registration under the 1933 Act and would not result in any violation of any
applicable state securities laws relating to the registration or qualification
of securities for sale, such opinion to be reasonably satisfactory to counsel to
Maker.
4. Subordination. The indebtedness evidenced by this Debenture is
subordinated to the prior payment when due of the principal of, premium, if any,
and interest on all "Senior Indebtedness" (as defined in the Securities Purchase
Agreement) of Maker. Therefore, upon any distribution of its assets in a
liquidation or dissolution of Maker, or in bankruptcy, reorganization,
insolvency, receivership or similar proceedings relating to Maker, Lender will
not be entitled to receive payment of the indebtedness evidenced by this
Debenture until the holders of Senior Indebtedness are paid in full. Upon the
occurrence of an "Event of Default" with respect to any Senior Indebtedness, as
such Event of Default may be defined in such instrument evidencing the Senior
Indebtedness, to the extent such Event of Default permits the holders of such
Senior Indebtedness to accelerate the maturity thereof, then upon written notice
thereof given to Maker by any holder of such Senior Indebtedness or their
representative, no payment shall be made by Maker in respect of this Debenture
until Maker has cured such Event of Default to the satisfaction of the holders
of such Senior Indebtedness; provided, however, that in the event such Senior
Indebtedness has not been accelerated within 30 days from the date of such
notice, the Maker shall resume all payments required to be made pursuant to the
terms of this Debenture.
5. Remedies and Events of Default. An Event of Default under this
Debenture shall occur under the circumstances identified in Section 9.1 of the
Securities Purchase Agreement. Upon the occurrence of an Event of Default,
Lender may exercise those remedies identified in section 9.2 of the Securities
Purchase Agreement.
6. Conversion Feature. The unpaid principal of this Debenture is
convertible at the option of the Lender, in whole or in part, at any time until
the Maturity Date, upon surrender of this Debenture at the principal office of
the Company, into restricted shares of the Maker's Common Stock at a conversion
price ("Conversion Price") equal to the lesser of: (i) 80% of the closing bid
price of the Company's Common Stock as reported by The NASDAQ Stock Market (or
the principal exchange upon which the Company's Common Stock trades) on the date
of conversion of the Debenture; or (ii) $12.00 per share. Upon such conversion,
all principal due under this Debenture shall be discharged and the Company
released from all obligations thereunder, however, accrued interest shall be
paid to the date of conversion. The conversion price of the Debenture may be
subject to adjustment in the manner provided at Paragraph 8
7. Redemption. Commencing September 12, 1998, this Debenture is subject
to redemption by the Company at any time thereafter at the principal amount,
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<PAGE>
plus any accrued and unpaid interest, on 30 days written notice provided that:
(i) the average of the closing bid prices of the Company's Common Stock as
reported by The NASDAQ Stock Market (or the principal exchange upon which the
Company's Common Stock trades) exceeds $25.00 per share for the 60 consecutive
trading days ending within 15 days of the Notice of Redemption; and (ii) the
resale of the shares of Common Stock issuable upon conversion of the Debenture
have been included within a Registration Statement declared effective by the
Securities and Exchange Commission. All Debentures must be redeemed if any are
redeemed.
8. Adjustments. The number of shares issuable to the Lender upon
conversion of this Debenture is subject to adjustment from time to time as
follows:
8.1. Reorganization, Merger or Sale of Assets. If at any time while
this Debenture, or any portion thereof, is outstanding there shall be (i) a
reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation with or into another corporation in which the Company is not the
surviving entity, or a reverse triangular merger in which the Company is the
surviving entity but the shares of the Company's capital stock outstanding
immediately prior to the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise, or (iii) a sale
or transfer of the Company's properties and assets as, or substantially as, an
entirety to any other person, then, as a part of such reorganization, merger,
consolidation, sale or transfer, lawful provision shall be made so that the
holder of this Debenture shall thereafter be entitled to receive upon conversion
of the Debentures the number of shares of stock or other securities or property
of the successor corporation resulting from such reorganization, merger,
consolidation, sale or transfer that a holder of the shares deliverable upon
conversion of this Debenture would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if this Debenture had
been converted immediately before such reorganization, merger, consolidation,
sale or transfer, all subject to further adjustment as provided in this Section
8. The foregoing provisions of this Section 8.1 shall similarly apply to
successive reorganizations, consolidations, mergers, sales and transfers and to
the stock or securities of any other corporation that are at the time receivable
upon the conversion of this Debenture. If the per-share consideration payable to
Lender for shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such consideration shall
be determined in good faith by the Company's Board of Directors. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Debenture
with respect to the rights and interests of Lender after the transaction, to the
end that the provisions of this Debenture shall be applicable after that event,
as near as reasonably may be, in relation to any shares or other property
deliverable after that event upon conversion of this Debenture.
8.2. Reclassification. If the Company, at any time while this
Debenture, or any portion thereof, remains outstanding, by reclassification of
securities or
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<PAGE>
otherwise, shall change any of the securities as to which conversion rights
under this Debenture exist into the same or a different number of securities of
any other class or classes, this Debenture shall thereafter represent the right
to acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
conversion rights under this Debenture immediately prior to such
reclassification or other change and the Conversion Price or number of shares
received upon such conversion shall be appropriately adjusted, all subject to
further adjustment as provided in this Section 8.
8.3. Split, Subdivision or Combination of Shares. If the Company at
any time while this Debenture, or any portion thereof, remains outstanding shall
split, subdivide or combine the securities as to which conversion rights under
this Debenture exist, into a different number of securities of the same class,
the number of shares issuable upon conversion shall be proportionately decreased
in the case of a split or subdivision or proportionately increased in the case
of a combination.
8.4. Adjustments for Dividends in Stock or Other Securities or
Property. If while this Debenture, or any portion hereof, remains outstanding
and unexpired the holders of the securities as to which conversion rights under
this Debenture exist at the time shall have received, or, on or after the record
date fixed for the determination of eligible stockholders, shall have become
entitled to receive, without payment therefor, other or additional stock or
other securities or property (other than cash) of the Company by way of
dividend, then and in each case, this Debenture shall represent the right to
acquire upon conversion, in addition to the number of shares of the security
receivable upon conversion of this Debenture, and without payment of any
additional consideration therefor, the amount of such other or additional stock
or other securities or property (other than cash) of the Company that such
holder would hold on the date of such conversion had it been the holder of
record of the security receivable upon conversion of this Debenture on the date
hereof and had thereafter, during the period from the date hereof to and
including the date of such conversion, retained such shares and/or all other
additional stock, other securities or property available by this Debenture as
aforesaid during such period, giving effect to all adjustments called for during
such period by the provisions of this Section 8.
8.5. Issuance of Shares Below Conversion Price.
(a) If while this Debenture, or any portion hereof, remains
outstanding, the Company shall offer and sell Additional Shares of Common Stock
(as hereinafter defined) for consideration per share less than the Conversion
Price in effect immediately prior to the issuance of such Additional Shares of
Common Stock, the Conversion Price in effect immediately prior to each such
issuance shall forthwith be
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<PAGE>
adjusted upon such issuance to a price equal to the price paid per share for
such Additional Shares of Common Stock.
(b) For the purpose of the calculations provided in this
Section 8.5, if at any time or from time to time after the date hereof the
Company shall issue any rights or options for the purchase of, or stock or other
securities convertible into, Additional Shares of Common Stock (such Common
Stock or securities being hereinafter referred to as "Convertible Securities"),
then, and in each case, if the Effective Price (as hereinafter defined) of such
rights, options or Convertible Securities shall be less than the Conversion
Price, the Company shall be deemed to have issued at the time of the issuance of
such rights or options or Convertible Securities the maximum number of
Additional Shares of Common Stock issuable upon exercise or conversion thereof
and to have received as consideration for the issuance of such shares an amount
equal to the total amount of the consideration, if any, payable to the Company
upon exercise or conversion of such options or rights. "Effective Price" shall
mean the quotient determined by dividing the total of all of such consideration
by such maximum number of Additional Shares of Common Stock. No further
adjustment shall be made as a result of the actual issuance of Additional Shares
of Common Stock on the exercise of any such rights or options or the conversion
of any such Convertible Securities. In the case of Convertible Securities which
have a conversion price which is based, in whole or in part, upon a discount to
the market price or value of the Common Stock, then for the purposes of
calculating the Effective Price, the consideration shall be deemed to include
the minimum conversion price payable to the Company.
If any such rights or options or the conversion privilege
represented by any such Convertible Securities shall expire prior to the
Maturity hereof without having been exercised, the adjustment to the number of
shares available hereunder upon the issuance of such rights, options or
Convertible Securities shall be readjusted to the number of shares that would
have been in effect had an adjustment been made on the basis that the only
Additional Shares of Common Stock so issued were the Additional Shares of Common
Stock, if any, actually issued or sold on the exercise of such rights or options
or rights of conversion of such Convertible Securities, and such Additional
Shares of Common Stock, if any, were issued or sold for the consideration
actually received by the Company for the granting of all such rights or options,
whether or not exercised, plus the consideration received for issuing or selling
the Convertible Securities actually converted plus the consideration, if any,
actually received by the Company on the conversion of such Convertible
Securities.
(c) For the purpose of the calculations provided for in this
Section 8.5, if at any time or from time to time after the date hereof the
Company shall issue any rights or options for the purchase of Convertible
Securities, then, in each such case, if the Effective Price thereof is less than
the then Conversion Price, the Company shall be deemed to have issued at the
time of the issuance of such rights or options the maximum number of Additional
Shares of Common Stock issuable upon conversion of the total amount of
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Convertible Securities covered by such rights or options and to have received as
consideration for the issuance of such Additional Shares of Common Stock an
amount equal to the amount of consideration, if any, received by the Company for
the issuance of such rights or options, plus the consideration, if any, payable
to the Company upon the conversion of such Convertible Securities. "Effective
Price" shall mean the quotient determined by dividing the total amount of such
consideration by such maximum number of Additional Shares of Common Stock. No
further adjustment of such Conversion Price adjusted upon the issuance of such
rights or options shall be made as a result of the actual issuance of the
Convertible Securities upon the exercise of such rights or options or upon the
actual issuance of Additional Shares of Common Stock upon the conversion of such
Convertible Securities.
The provisions of subsection (b) above for readjustment upon
the expiration of rights or options or the rights of conversion of Convertible
Securities, shall apply mutatis mutandis to the rights, options and Convertible
Securities referred to in this subsection (c).
(d) The term "Additional Shares of Common Stock" as used herein
shall mean all shares of Common Stock issued or deemed issued by the Company
after the date hereof, other than (i) securities issued pursuant to or in
connection with the terms of the Securities Purchase Agreement dated of even
date herewith, by and among the Company and Merrill Lynch World Income Fund,
Inc. and Convertible Holdings, Inc.; (ii) shares of Common Stock issued upon
conversion of convertible securities or the exercise of common stock purchase
warrants outstanding as of the date hereof; (iii) shares of Common Stock
issuable to employees, officers or directors pursuant to the Company's stock
option plan; (iv) shares of Common Stock issued or issuable to directors in
connection with their service as directors; (v) shares of Common Stock issued or
issuable to directors, officers or employees for services rendered or to be
rendered pursuant to arrangements approved by the Board of Directors; and (vii)
shares of Common Stock issued in connection with a business combination, merger,
consolidation, asset acquisition or the acquisition of the business of another
corporation (through the purchase of stock or assets) approved by the Board of
Directors.
8.6. No Impairment. Maker will not, by any voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by Maker, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 8 and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of Lender against impairment.
9. Investment Intent. Lender, by acceptance hereof, acknowledges that
this Debenture and the shares to be issued upon conversion hereof are being
acquired solely for Lender's own account and not as a nominee for any other
party, and for investment, and that Lender will not offer, sell or otherwise
dispose of this Debenture or any shares to
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be issued upon conversion hereof except under circumstances that will not result
in a violation of applicable federal and state securities laws. Upon exercise of
this Debenture, Lender shall, if requested by Maker, confirm in writing, in a
form satisfactory to Maker, that the shares so purchased are being acquired
solely for Lender's own account and not as a nominee for any other party, for
investment, and not with a view toward distribution or resale.
All shares issued upon exercise hereof shall be stamped or imprinted
with a legend in substantially the following form (in addition to any legend
required by state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SECURITIES AND ANY
SECURITIES OR SHARES ISSUED UPON CONVERSION THEREOF MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT.
10. Reservation of Shares. Maker covenants that during the term that
this Debenture is outstanding, Maker will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of the shares upon the conversion of this Debenture, from time to time, will
take all steps necessary to amend its Certificate of Incorporation (the
"Certificate") to provide sufficient reserves of shares of Common Stock issuable
upon the conversion of the Debenture. Maker further covenants that all shares
that may be issued upon the conversion of this Debenture and payment of the
Conversion Price, all as set forth herein, will be free from all taxes, liens
and charges in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously or otherwise specified herein). Maker
agrees that its issuance of this Debenture shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the shares upon the conversion
of this Debenture.
11. Notices.
(a) Whenever the number of shares issuable or the Conversion Price
hereunder shall be adjusted pursuant to Section 8 hereof, the Company shall
issue a certificate signed by its Chief Financial Officer setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the
Conversion Price and number of shares purchasable hereunder after giving effect
to such adjustment, and shall cause a copy of such certificate to be mailed (by
first-class mail, postage prepaid) to Lender.
(b) All notices, advices and communications under this Debenture
shall be deemed to have been given, (i) in the case of personal delivery, on the
date of such delivery and (ii) in the case of mailing, on the third business day
following the date of such mailing, addressed as follows:
7
<PAGE>
If to Maker:
NAL Financial Group Inc.
500 Cypress Creek Road West, Suite 590
Ft. Lauderdale, FL 33309
Attention: Robert R. Bartolini, President
With a Copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll, Professional Corporation
1200 Two Logan Square
18th and Arch Streets
Philadelphia, PA 19103-2771
and to the Lender:
at the address of the Lender appearing on the
books of the Company or the Company's
transfer agent, if any.
Either of Maker or Lender may from time to time change the address to
which notices to it are to be mailed hereunder by notice in accordance with the
provisions of this Section 11.
12. Registration Rights. Lender shall be entitled to the registration
rights set forth in a certain Registration Rights Agreement of even date
herewith by and between Maker and Lender.
13. Amendments.
(a) Any term of this Debenture may be amended with the written
consent of the Company and the Holder. Any amendment effected in accordance with
this Section 13 shall be binding upon the Holder, each future holder and the
Company.
(b) No waivers of, or exceptions to, any term, condition or
provision of this Debenture, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such term, condition
or provision.
14. Agreements of Maker. Maker and any other party now or hereafter
liable for the payment of this Debenture in whole or in part, hereby severally
(i) waive demand, presentment for payment, notice of nonpayment, protest, notice
of protest, notice of intent to accelerate, notice of acceleration and all other
notice, filing of suit and diligence in collecting this Debenture, (ii) agree to
the release of any party primarily or secondarily liable hereon, (iii) agree
that the Lender shall not be required first to institute suit or
8
<PAGE>
exhaust its remedies hereon against Maker or others liable or to become liable
hereon or to enforce its rights against them, and (iv) consent to any extension
or postponement of time of payment of this Debenture and to any other indulgence
with respect hereto without notice thereof to any of them.
15. Binding Parties. This Debenture shall bind Maker and its successors
and assigns, and the benefits hereof shall inure to the benefit of Lender and
its successors and assigns. All references herein to "Maker" and "Lender" shall
be deemed to apply to Maker and Lender, respectively, and to their respective
successors and assigns.
16. Governing Law. The corporate law of the State of Delaware shall
govern all issues and questions concerning the relative rights of the Company
and its stockholders. All other questions concerning the construction, validity,
interpretation and enforceability of this Debenture and the exhibits and
schedules hereto shall be governed by, and construed in accordance with, the
laws of the State of Delaware, without giving effect to any choice of law or
conflict of law rules or provisions (whether of the State of Delaware or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
9
<PAGE>
17. Jurisdiction. The Lender and the Maker agree to submit to personal
jurisdiction and to waive any objection as to venue in the federal or state
courts in the County of New Castle, State of Delaware. Service of process on the
Maker or the Lender in any action arising out of or relating to this Debenture
shall be effective if mailed to such party at the address listed in Section 11
hereof.
18. Section Titles. The Section titles in this Debenture are and shall
be without substantive meaning or content of any kind whatsoever and are not a
part of this Debenture.
WITNESS the due execution hereof on the date first above written with
the intention that this Debenture shall constitute a sealed instrument.
NAL FINANCIAL GROUP INC.
By: (Seal)
-----------------------------------------
Robert R. Bartolini
Chief Executive Officer
10
<PAGE>
NOTICE OF CONVERSION
TO: NAL FINANCIAL GROUP INC.
(1) The undersigned hereby elects to purchase _______ shares of Common
Stock of NAL FINANCIAL GROUP INC. pursuant to the terms of the attached
Debenture, and tenders herewith payment of the purchase price for such shares in
full.
(2) In converting this Debenture, the undersigned will not offer, sell
or otherwise dispose of any such shares of Common Stock except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws.
(3) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
---------------------------------
(Name)
---------------------------------
(Name)
(4) Please issue a new Debenture for the unexercised portion of the
attached Debenture in the name of the undersigned or in such other name as is
specified below:
---------------------------------
(Name)
- ------------------------------ ---------------------------------
(Date) (Signature)
11
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE HOLDER
PURSUANT TO A SECURITIES PURCHASE AGREEMENT DATED SEPTEMBER 12, 1996 BY AND
BETWEEN NAL FINANCIAL GROUP INC. AND MERRILL LYNCH WORLD INCOME FUND, INC. AND
CONVERTIBLE HOLDINGS, INC., AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS.
THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION FROM REGISTRATION,
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BASED ON AN OPINION LETTER OF
COUNSEL TO HOLDER REASONABLY SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER
FROM THE SECURITIES AND EXCHANGE COMMISSION."
WARRANT TO PURCHASE COMMON STOCK
OF
NAL FINANCIAL GROUP INC.
Void after September 11, 2001
This certifies that, for value received, and in conjunction with the
terms and conditions of a Securities Purchase Agreement dated September 12, 1996
by and between NAL Financial Group Inc. (the "Company") and Merrill Lynch World
Income Fund, Inc. and Convertible Holdings, Inc. (the "Securities Purchase
Agreement"), Bridge Rope & Co., ("Holder") is entitled, subject to the terms set
forth below, to purchase from the Company, a Delaware corporation, shares of the
Common Stock of the Company (the "Shares"), as constituted on the date hereof
(the "Warrant Issue Date"), with the Notice of Exercise attached hereto duly
executed, and simultaneous payment therefor in lawful money of the United
States, at the Exercise Price as set forth in Section 2 below. The number,
character and Exercise Price of the shares are subject to adjustment as provided
below.
1. Term of Warrant. This Warrant shall be exercisable, in whole or in
part, during the term commencing on the Warrant Issue Date and ending at 5:00
p.m. on September 11, 2001, and shall be void thereafter.
2. Exercise Price and Number of Shares.
2.1 Exercise Price. The Exercise Price at which this Warrant may be
exercised shall be $13.92 per share of common stock, as adjusted pursuant to
Section 11 hereof.
2.2 Number of Shares. The number of shares of the Company's Common
Stock, $.15 par value per share ("Common Stock") which may be purchased pursuant
to this Warrant shall be 28,125 shares, as adjusted pursuant to Section 11
hereof.
3. Exercise of Warrant.
(a) The purchase rights represented by this Warrant are exercisable
by the Holder in whole or in part, at any time, or from time to time, by the
surrender of this Warrant and the Notice of Exercise annexed hereto duly
completed and executed on behalf of the Holder, at the office of the Company (or
such other office or agency of the Company as it may designate by notice in
writing to the Holder at the address of the Holder appearing on the books of the
Company), upon payment in cash or by check acceptable to the Company.
<PAGE>
(b) This Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of its surrender for exercise as
provided above, and the person entitled to receive the shares of Common Stock
issuable upon such exercise shall be treated for all purposes as the holder of
record of such shares as of the close of business on such date. As promptly as
practicable on or after such date and in any event within ten (10) days
thereafter, the Company at its expense shall issue and deliver to the person or
persons entitled to receive the same a certificate or certificates for the
number of shares issuable upon such exercise. In the event that this Warrant is
exercised in part, the Company at its expense will execute and deliver a new
Warrant of like tenor exercisable for the number of shares for which this
Warrant may then be exercised.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional share to which the Holder would otherwise be
entitled, the Company shall make a cash payment equal to the Exercise Price
multiplied by such fraction.
5. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and substance to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor and amount.
6. Rights of Stockholders. Subject to Sections 9 and 11 of this Warrant
and the provisions of any other written agreement between the Company and the
Holder, the Holder shall not be entitled to vote or receive dividends or be
deemed the holder of Common Stock or any other securities of the Company that
may at any time be issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the Holder, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of stock, reclassification of stock, change
of par value, or change of stock to no par value, consolidation, merger,
conveyance or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the Warrant shall have been
exercised as provided herein.
7. Transfer of Warrant.
7.1. Exchange of Warrant Upon a Transfer. On surrender of this
Warrant for exchange, properly endorsed, the Company at its expense shall issue
to or on the order of the Holder a new warrant or warrants of like tenor, in the
name of the Holder or as the Holder (on payment by the Holder of any applicable
transfer taxes) may direct, of the number of shares issuable upon exercise
hereof.
<PAGE>
7.2. Compliance with Securities Laws; Restrictions on Transfers.
(a) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the Shares to be issued upon exercise hereof
are being acquired solely for the Holder's own account and not as a nominee for
any other party, and for investment, and that the Holder will not offer, sell or
otherwise dispose of this Warrant or any Shares to be issued upon exercise
hereof except under circumstances that will not result in a violation of
applicable federal and state securities laws. Upon exercise of this Warrant, the
Holder shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the shares of Common Stock so purchased are
being acquired solely for the Holder's own account and not as a nominee for any
other party, for investment, and not with a view toward distribution or resale.
(b) Neither this Warrant nor any share of Common Stock issued
upon exercise of this Warrant may be offered for sale or sold, or otherwise
transferred or sold in any transaction which would constitute a sale thereof
within the meaning of the Securities Act of 1933, as amended (the "1933 Act"),
unless (i) such security has been registered for sale under the 1933 Act and
registered or qualified under applicable state securities laws relating to the
offer an sale of securities, or (ii) exemptions from the registration
requirements of the 1933 Act and the registration or qualification requirements
of all such state securities laws are available if requested in writing by the
Holder and the Company shall have received an opinion of counsel to the Holder
reasonably satisfactory to the Company that the proposed sale or other
disposition of such securities may be effected without registration under the
1933 Act and would not result in any violation of any applicable state
securities laws relating to the registration or qualification of securities for
sale, such counsel and such opinion to be reasonably satisfactory to the
Company.
(c) All Shares issued upon exercise hereof shall be stamped or
imprinted with a legend in substantially the following form (in addition to any
legend required by state securities laws).
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE HOLDER
PURSUANT TO A SECURITIES PURCHASE AGREEMENT DATED SEPTEMBER __, 1996 BY AND
BETWEEN NAL FINANCIAL GROUP INC. AND MERRILL LYNCH WORLD INCOME FUND, INC. AND
CONVERTIBLE HOLDINGS, INC., AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS.
THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION FROM REGISTRATION,
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BASED ON AN OPINION LETTER OF
COUNSEL TO THE HOLDER REASONABLY SATISFACTORY TO THE COMPANY OR A NO-ACTION
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION."
Holder recognizes that investing in the Warrant and the Common Stock
involves a high degree of risk, and Holder is in a financial position to hold
the Warrant and the Common Stock indefinitely and is able to bear the economic
risk and withstand a complete loss of its investment in the Warrant and the
Common Stock. The Holder is a sophisticated investor and is capable of
evaluating the merits and risks of investing in the Company. The Holder has had
an opportunity to discuss the Company's business, management and financial
affairs with the Company's management, has been given full and complete access
to information concerning the Company, and has utilized such access to its
satisfaction for the purpose of obtaining information or verifying information
and have had the opportunity to inspect the Company's operation. Holder has had
the opportunity to ask questions of, and receive answers from the management of
the Company (and any person acting on its behalf) concerning the Warrant and the
Common Stock and the agreements and transactions contemplated hereby, and to
obtain any additional information as Holder may have requested in making its
investment decision. The Holder is an "accredited investor", as defined by
Regulation D promulgated under the Act.
<PAGE>
8. Reservation of Stock. The Company covenants that during the term
that this Warrant is exercisable, the Company will reserve from its authorized
and unissued Common Stock a sufficient number of shares to provide for the
issuance of the shares upon the exercise of this Warrant, from time to time,
will take all steps necessary to amend its Certificate of Incorporation (the
"Certificate") to provide sufficient reserves of shares of Common Stock issuable
upon the exercise of the Warrant. The Company further covenants that all shares
that may be issued upon the exercise of rights represented by this Warrant, upon
exercise of the rights represented by this Warrant and payment of the Exercise
Price, all as set forth herein, will be free from all taxes, liens and charges
in respect of the issue thereof (other than taxes in respect of any transfer
occurring contemporaneously or otherwise specified herein). The Company agrees
that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the shares of Common Stock upon
the exercise of this Warrant.
9. Notices.
(a) Whenever the Exercise Price or number of shares purchasable
hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall
issue a certificate signed by its Chief Financial Officer setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the Exercise
Price and number of shares purchasable hereunder after giving effect to such
adjustment, and shall cause a copy of such certificate to be mailed (by
first-class mail, postage prepaid) to the Holder of this Warrant.
(b) All notices, advices and communications under this Warrant shall
be deemed to have been given, (i) in the case of personal delivery, on the date
of such delivery and (ii) in the case of mailing, on the third business day
following the date of such mailing, addressed as follows:
If to the Company:
NAL Financial Group Inc.
500 Cypress Creek Road West, Suite 590
Ft. Lauderdale, FL 33309
Attention: Mr. Robert R. Bartolini
<PAGE>
With a Copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll, Professional Corporation
Two Logan Square, 12th Floor
18th & Arch Streets
Philadelphia, PA 19103-2771
and to the Holder:
at the address of the Holder appearing on the books
of the Company or the Company's transfer agent, if
any.
Either of the Company or the Holder may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Paragraph 9.
10. Amendments.
(a) Any term of this Warrant may be amended with the written
consent of the Company and the Holder. Any amendment effected in accordance with
this Section 10 shall be binding upon the Holder, each future holder and the
Company.
(b) No waivers of, or exceptions to, any term, condition or
provision of this Warrant, in any one or more instances, shall be deemed to be,
or construed as, a further or continuing waiver of any such term, condition or
provision.
11. Adjustments. The number of Shares of Common Stock purchasable
hereunder and the Exercise Price is subject to adjustment from time to time upon
the occurrence of certain events, as follows:
11.1. Reorganization, Merger or Sale of Assets. If at any time
while this Warrant, or any portion thereof, is outstanding and unexpired there
shall be (i) a reorganization (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for herein), (ii) a merger
or consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which the
Company is the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, or (iii) a sale or transfer of substantially all of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such reorganization, merger, consolidation, sale or transfer,
lawful provision shall be made so that the holder of this Warrant shall
thereafter be entitled to receive upon payment of the Exercise Price then in
effect, the number of shares of stock or other securities or property of the
successor corporation resulting from such reorganization, merger, consolidation,
sale or transfer that a holder of the shares deliverable upon exercise of this
Warrant would have been entitled to receive in such reorganization,
consolidation, merger, sale or transfer if this Warrant had been exercised
immediately before such reorganization, merger, consolidation, sale or transfer,
all subject to further adjustment as provided in this Section 11. The foregoing
provisions of this Section 11.1 shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the stock
or securities of any other corporation that are at the time receivable upon the
exercise of this Warrant. If the per-share consideration payable to the Holder
hereof for shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such consideration shall
be determined in good faith by the Company's Board of Directors. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Holder after the transaction, to
the end that the provisions of this Warrant shall be applicable after that
event, as near as reasonably may be, in relation to any shares or other property
deliverable after that event upon exercise of this Warrant.
11.2. Reclassification. If the Company, at any time while this
Warrant, or any portion thereof, remains outstanding and unexpired, by
reclassification of securities or otherwise, shall change any of the securities
as to which purchase rights under this Warrant exist into the same or a
different number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefor shall be appropriately adjusted, all subject to further
adjustment as provided in this Section 11.
11.3. Split, Subdivision or Combination of Shares. If the Company
at any time while this Warrant, or any portion thereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase
rights under this Warrant exist, into a different number of securities of the
same class, the Exercise Price and the number of shares issuable upon exercise
of this Warrant shall be proportionately adjusted.
11.4. Adjustments for Dividends in Stock or Other Securities or
Property. If while this Warrant, or any portion hereof, remains outstanding and
unexpired the holders of the securities as to which purchase rights under this
Warrant exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible Stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend, then
and in each case, this Warrant shall represent the right to acquire, in addition
to the number of shares of the security receivable upon exercise of this
Warrant, and without payment of any additional consideration therefor, the
amount of such other or additional stock or other securities or property (other
than cash) of the Company that such holder would hold on the date of such
exercise had it been the holder of record of the security receivable upon
exercise of this Warrant on the date hereof and had thereafter, during the
period from the date hereof to and including the date of such exercise, retained
such shares and/or all other additional stock, other securities or property
available by this Warrant as aforesaid during such period.
<PAGE>
11.5. Cumulative Adjustments for Issuance(s) of Shares.
(a) If at any time between the Warrant Issue Date and the
date upon which this Warrant is exercised, in whole or in part ("Exercise
Date"), the Company shall offer and sell Additional Shares of Common Stock (as
hereinafter defined) for cash consideration in a private or public sale
transaction(s), then immediately prior to the exercise of the Warrant, in whole
or in part, the Exercise Price Per Share as adjusted pursuant to Section 11.1
through 11.5, if any (the "Adjusted Exercise Price Per Share") and the number of
shares issuable upon exercise shall be adjusted only in the event that the
average consideration per share ("Average Sales Price Per Share") received by
the Company upon such sale(s) on a cumulative basis (as adjusted to take into
account the effect of any adjustments under Section 11.1 through 11.4) is less
than the Exercise Price on the Warrant Issue Date.
The Adjusted Exercise Price per Share as adjusted in
conjunction with the exercise of this Warrant on the Exercise Date shall equal
the product of the Exercise Price Per Share on the Warrant Issue Date multiplied
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding on the Warrant Issue Date (as adjusted to take into account
the effect of any adjustment under Sections 11.1 through 11.4 during the period
from the Warrant Issue Date to the Exercise Date, if any) plus the number of
shares of Common Stock which the aggregate consideration received for the
issuance(s) or sale(s) of the Additional Shares of Common Stock during the
period from the Warrant Issue Date to the Exercise Date would purchase at the
Adjusted Exercise Price Per Share on the Warrant Issue Date, and the denominator
of which shall be the number of shares of Common Stock outstanding after taking
into account the Additional Shares of Common Stock (including upon exercise of
warrants and conversion of Convertible Securities).
(b) For the purpose of this Section 11.5, the consideration
received by the Company for any issue or sale of securities shall, (i) to the
extent it consists of cash, be computed at the gross amount of cash received by
the Company before deduction of any underwriting or similar commissions,
concessions or compensation paid or allowed by the Company in connection with
such issue or sale, (ii) to the extent it consists of a service or property
other than cash, be computed at the fair value of that service or property as
determined in good faith by the Board of Directors; and (iii) if Additional
Shares of Common Stock, Convertible Securities (as hereinafter defined), or
rights or options to purchase either Additional Shares of Common Stock or
Convertible Securities are issued or sold together with other stock or
securities or other assets of the Company for a consideration that covers both,
be computed as the portion of the consideration so received that may be
reasonably determined in good faith by the Board to be allocable to such
Additional Shares of Common Stock, Convertible Securities or rights or options.
(c) For the purpose of the calculations provided in this
Section 11.5, if at any time or from time to time after the Warrant Issue Date
the Company shall issue any rights or options for the purchase of, or stock or
other securities convertible into, Additional Shares of Common Stock (such
Common Stock or securities being hereinafter referred to as "Convertible
Securities"), then, and in each case, if the Effective Price (as hereinafter
defined) of such rights, options or Convertible Securities shall be less than
the Exercise Price, the Company shall be deemed to have issued at the time of
the issuance of such rights or options or Convertible Securities the maximum
number of Additional Shares of Common Stock issuable upon exercise or conversion
thereof and to have received as consideration for the issuance of such shares an
amount equal to the total amount of the consideration, if any, payable to the
Company upon exercise or conversion of such options or rights. "Effective Price"
shall mean the quotient determined by dividing the total of all of such
consideration by such maximum number of Additional Shares of Common Stock. No
further adjustment shall be made as a result of the actual issuance of
Additional Shares of Common Stock on the exercise of any such rights or options
or the conversion of any such Convertible Securities. In the case of Convertible
Securities which have a conversion price which is based, in whole or in part,
upon a discount to the market price or value of the Common Stock, then for the
purposes of calculating the Effective Price, the consideration shall be deemed
to include the minimum conversion price payable to the Company.
<PAGE>
If any such rights or options or the conversion privilege
represented by any such Convertible Securities shall expire without having been
exercised, the adjustment to the number of shares available hereunder upon the
issuance of such rights, options or Convertible Securities shall be readjusted
to the number of shares that would have been in effect had an adjustment been
made on the basis that the only Additional Shares of Common Stock so issued were
the Additional Shares of Common Stock, if any, actually issued or sold on the
exercise of such rights or options or rights of conversion of such Convertible
Securities, and such Additional Shares of Common Stock, if any, were issued or
sold for the consideration actually received by the Company for the granting of
all such rights or options, whether or not exercised, plus the consideration
received for issuing or selling the Convertible Securities actually converted
plus the consideration, if any, actually received by the Company on the
conversion of such Convertible Securities.
(d) For the purpose of the calculations provided for in this
Section 11.5, if at any time or from time to time after the Warrant Issue Date
the Company shall issue any rights or options for the purchase of Convertible
Securities, then, in each such case, if the Effective Price thereof is less than
the then Exercise Price, the Company shall be deemed to have issued at the time
of the issuance of such rights or options the maximum number of Additional
Shares of Common Stock issuable upon conversion of the total amount of
Convertible Securities covered by such rights or options and to have received as
consideration for the issuance of such Additional Shares of Common Stock an
amount equal to the amount of consideration, if any, received by the Company for
the issuance of such rights or options, plus the consideration, if any, payable
to the Company upon the conversion of such Convertible Securities. "Effective
Price" shall mean the quotient determined by dividing the total amount of such
consideration by such maximum number of Additional Shares of Common Stock. No
further adjustment of such Exercise Price adjusted upon the issuance of such
rights or options shall be made as a result of the actual issuance of the
Convertible Securities upon the exercise of such rights or options or upon the
actual issuance of Additional Shares of Common Stock upon the conversion of such
Convertible Securities.
<PAGE>
The provisions of subsection (c) above for readjustment upon
the expiration of rights or options or the rights of conversion of Convertible
Securities, shall apply mutatis mutandis to the rights, options and Convertible
Securities referred to in this subsection (d).
(e) Upon each adjustment in the Exercise Price or the
Adjusted Exercise Price, as applicable, the number of shares of Common Stock
purchasable hereunder shall be adjusted, to the nearest one hundredth of a whole
share, to the product obtained by multiplying such number of shares purchasable
immediately prior to such adjustment in the Exercise Price by a fraction, the
numerator of which shall be the Exercise Price immediately prior to such
adjustment and the denominator of which shall be the Exercise Price immediately
thereafter. For purposes of any calculation under this subsection, the Exercise
Price and the adjusted Exercise Price shall be determined to the nearest
ten-thousandth of a cent.
(f) The term "Additional Shares of Common Stock" as used
herein shall mean all shares of Common Stock issued or deemed issued by the
Company after the Warrant Issue Date, other than (i) securities issued pursuant
to or in connection with the Securities Purchase Agreement dated of even date
herewith, by and among the Company and the Great American Reserve Insurance
Company, Beneficial Standard Life Insurance Company and Conseco, Inc., and the
debentures issued thereunder; (ii) shares of Common Stock issued upon conversion
of convertible securities or the exercise of common stock purchase warrants
outstanding as of the Warrant Issue Date; (iii) shares of Common Stock issuable
to employees, officers or directors pursuant to the Company's stock option plan;
(iv) shares of Common Stock issued or issuable to directors in connection with
their service as directors; (v) shares of Common Stock issued or issuable to
directors, officers or employees for services rendered or to be rendered
pursuant to arrangements approved by the Board of Directors; and (vii) shares of
Common Stock issued in connection with a business combination, merger,
consolidation, asset acquisition or the acquisition of the business of another
corporation (through the purchase of stock or assets) approved by the Board of
Directors.
11.6 The Company will not, by any voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good faith assist
in the carrying out of all the provisions of this Section 11 and in the taking
of all such action as may be necessary or appropriate in order to protect the
rights of the Holders of this Warrant against impairment.
12. Registration Rights. The Holder shall be entitled to the
registration rights set forth in that certain Registration Rights Agreement of
even date herewith by and between the Company and such Holder.
13. Severability. Whenever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this Warrant
in such jurisdiction or affect the validity, legality or enforceability of any
provision in any other jurisdiction, but this Warrant shall be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
<PAGE>
14. Governing Law. The corporate law of the State of Delaware shall
govern all issues and questions concerning the relative rights of the Company
and its stockholders. All other questions concerning the construction, validity,
interpretation and enforceability of this Warrant and the exhibits and schedules
hereto shall be governed by, and construed in accordance with, the laws of the
State of Delaware, without giving effect to any choice of law or conflict of law
rules or provisions (whether of the State of Delaware or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Delaware.
15. Jurisdiction. The Holder and the Company agree to submit to
personal jurisdiction and to waive any objection as to venue in the federal or
state courts in Delaware located at or near New Castle County. Service of
process on the Company or the Holder in any action arising out of or relating to
this Warrant shall be effective if mailed to such party at the address listed in
Section 9 hereof.
16. Arbitration. If a dispute arises as to interpretation of this
Warrant, it shall be decided finally by three arbitrators in an arbitration
proceeding conforming to the Rules of the American Arbitration Association
applicable to commercial arbitration. The arbitrators shall be appointed as
follows: one by the Company, one by the Holder and the third by the said two
arbitrators, or, if they cannot agree, then the third arbitrator shall be
appointed by the American Arbitration Association. The third arbitrator shall be
chairman of the panel and shall be impartial. The arbitration shall take place
in Delaware located at or near New Castle County. The decision of a majority of
the Arbitrators shall be conclusively binding upon the parties and final, and
such decision shall be enforceable as a judgment in any court of competent
jurisdiction. Each party shall pay the fees and expenses of the arbitrator
appointed by it, its counsel and its witnesses. The parties shall share equally
the fees and expenses of the impartial arbitrator.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officers thereunto duly authorized.
Dated: September __, 1996
HOLDER: ______________________ NAL FINANCIAL GROUP INC.
By:_____________________________ By:_____________________________
___________________ Robert R. Bartolini
Executive Officer Chief Executive Officer
<PAGE>
NOTICE OF EXERCISE
TO: NAL FINANCIAL GROUP INC.
(1) The undersigned hereby elects to purchase _______ shares of Common
Stock of NAL FINANCIAL GROUP INC. pursuant to the terms of the attached Warrant,
and tenders herewith payment of the purchase price for such shares in full.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock to be issued upon conversion
thereof are being acquired solely for the account of the undersigned and not as
a nominee for any other party, and for investment, and that the undersigned will
not offer, sell or otherwise dispose of any such shares of Common Stock except
under circumstances that will not result in a violation of the Securities Act of
1933, as amended, or any state securities laws.
(3) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
-----------------------------------
(Name)
-----------------------------------
(Name)
(4) Please issue a new Warrant for the unexercised portion of the
attached Warrant in the name of the undersigned or in such other name as is
specified below:
-----------------------------------
(Name)
- -------------------- -----------------------------------
(Date) (Signature)
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE HOLDER
PURSUANT TO A SECURITIES PURCHASE AGREEMENT DATED SEPTEMBER 12, 1996 BY AND
BETWEEN NAL FINANCIAL GROUP INC. AND MERRILL LYNCH WORLD INCOME FUND, INC. AND
CONVERTIBLE HOLDINGS, INC., AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS.
THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION FROM REGISTRATION,
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BASED ON AN OPINION LETTER OF
COUNSEL TO HOLDER REASONABLY SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER
FROM THE SECURITIES AND EXCHANGE COMMISSION."
WARRANT TO PURCHASE COMMON STOCK
OF
NAL FINANCIAL GROUP INC.
Void after September 11, 2001
This certifies that, for value received, and in conjunction with the
terms and conditions of a Securities Purchase Agreement dated September 12, 1996
by and between NAL Financial Group Inc. (the "Company") and Merrill Lynch World
Income Fund, Inc. and Convertible Holdings, Inc. (the "Securities Purchase
Agreement"), Kane & Co., ("Holder") is entitled, subject to the terms set forth
below, to purchase from the Company, a Delaware corporation, shares of the
Common Stock of the Company (the "Shares"), as constituted on the date hereof
(the "Warrant Issue Date"), with the Notice of Exercise attached hereto duly
executed, and simultaneous payment therefor in lawful money of the United
States, at the Exercise Price as set forth in Section 2 below. The number,
character and Exercise Price of the shares are subject to adjustment as provided
below.
1. Term of Warrant. This Warrant shall be exercisable, in whole or in
part, during the term commencing on the Warrant Issue Date and ending at 5:00
p.m. on September 11, 2001, and shall be void thereafter.
2. Exercise Price and Number of Shares.
2.1 Exercise Price. The Exercise Price at which this Warrant may be
exercised shall be $13.92 per share of common stock, as adjusted pursuant to
Section 11 hereof.
2.2 Number of Shares. The number of shares of the Company's Common
Stock, $.15 par value per share ("Common Stock") which may be purchased pursuant
to this Warrant shall be 34,375 shares, as adjusted pursuant to Section 11
hereof.
3. Exercise of Warrant.
(a) The purchase rights represented by this Warrant are exercisable
by the Holder in whole or in part, at any time, or from time to time, by the
surrender of this Warrant and the Notice of Exercise annexed hereto duly
completed and executed on behalf of the Holder, at the office of the Company (or
such other office or agency of the Company as it may designate by notice in
writing to the Holder at the address of the Holder appearing on the books of the
Company), upon payment in cash or by check acceptable to the Company.
<PAGE>
(b) This Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of its surrender for exercise as
provided above, and the person entitled to receive the shares of Common Stock
issuable upon such exercise shall be treated for all purposes as the holder of
record of such shares as of the close of business on such date. As promptly as
practicable on or after such date and in any event within ten (10) days
thereafter, the Company at its expense shall issue and deliver to the person or
persons entitled to receive the same a certificate or certificates for the
number of shares issuable upon such exercise. In the event that this Warrant is
exercised in part, the Company at its expense will execute and deliver a new
Warrant of like tenor exercisable for the number of shares for which this
Warrant may then be exercised.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional share to which the Holder would otherwise be
entitled, the Company shall make a cash payment equal to the Exercise Price
multiplied by such fraction.
5. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and substance to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor and amount.
6. Rights of Stockholders. Subject to Sections 9 and 11 of this Warrant
and the provisions of any other written agreement between the Company and the
Holder, the Holder shall not be entitled to vote or receive dividends or be
deemed the holder of Common Stock or any other securities of the Company that
may at any time be issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the Holder, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of stock, reclassification of stock, change
of par value, or change of stock to no par value, consolidation, merger,
conveyance or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the Warrant shall have been
exercised as provided herein.
7. Transfer of Warrant.
7.1. Exchange of Warrant Upon a Transfer. On surrender of this
Warrant for exchange, properly endorsed, the Company at its expense shall issue
to or on the order of the Holder a new warrant or warrants of like tenor, in the
name of the Holder or as the Holder (on payment by the Holder of any applicable
transfer taxes) may direct, of the number of shares issuable upon exercise
hereof.
<PAGE>
7.2. Compliance with Securities Laws; Restrictions on Transfers.
(a) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the Shares to be issued upon exercise hereof
are being acquired solely for the Holder's own account and not as a nominee for
any other party, and for investment, and that the Holder will not offer, sell or
otherwise dispose of this Warrant or any Shares to be issued upon exercise
hereof except under circumstances that will not result in a violation of
applicable federal and state securities laws. Upon exercise of this Warrant, the
Holder shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the shares of Common Stock so purchased are
being acquired solely for the Holder's own account and not as a nominee for any
other party, for investment, and not with a view toward distribution or resale.
(b) Neither this Warrant nor any share of Common Stock issued
upon exercise of this Warrant may be offered for sale or sold, or otherwise
transferred or sold in any transaction which would constitute a sale thereof
within the meaning of the Securities Act of 1933, as amended (the "1933 Act"),
unless (i) such security has been registered for sale under the 1933 Act and
registered or qualified under applicable state securities laws relating to the
offer an sale of securities, or (ii) exemptions from the registration
requirements of the 1933 Act and the registration or qualification requirements
of all such state securities laws are available if requested in writing by the
Holder and the Company shall have received an opinion of counsel to the Holder
reasonably satisfactory to the Company that the proposed sale or other
disposition of such securities may be effected without registration under the
1933 Act and would not result in any violation of any applicable state
securities laws relating to the registration or qualification of securities for
sale, such counsel and such opinion to be reasonably satisfactory to the
Company.
(c) All Shares issued upon exercise hereof shall be stamped or
imprinted with a legend in substantially the following form (in addition to any
legend required by state securities laws).
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE HOLDER
PURSUANT TO A SECURITIES PURCHASE AGREEMENT DATED SEPTEMBER __, 1996 BY AND
BETWEEN NAL FINANCIAL GROUP INC. AND MERRILL LYNCH WORLD INCOME FUND, INC. AND
CONVERTIBLE HOLDINGS, INC., AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS.
THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION FROM REGISTRATION,
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BASED ON AN OPINION LETTER OF
COUNSEL TO HOLDER REASONABLY SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER
FROM THE SECURITIES AND EXCHANGE COMMISSION."
Holder recognizes that investing in the Warrant and the Common Stock
involves a high degree of risk, and Holder is in a financial position to hold
the Warrant and the Common Stock indefinitely and is able to bear the economic
risk and withstand a complete loss of its investment in the Warrant and the
Common Stock. The Holder is a sophisticated investor and is capable of
evaluating the merits and risks of investing in the Company. The Holder has had
an opportunity to discuss the Company's business, management and financial
affairs with the Company's management, has been given full and complete access
to information concerning the Company, and has utilized such access to its
satisfaction for the purpose of obtaining information or verifying information
and have had the opportunity to inspect the Company's operation. Holder has had
the opportunity to ask questions of, and receive answers from the management of
the Company (and any person acting on its behalf) concerning the Warrant and the
Common Stock and the agreements and transactions contemplated hereby, and to
obtain any additional information as Holder may have requested in making its
investment decision. The Holder is an "accredited investor", as defined by
Regulation D promulgated under the Act.
<PAGE>
8. Reservation of Stock. The Company covenants that during the term
that this Warrant is exercisable, the Company will reserve from its authorized
and unissued Common Stock a sufficient number of shares to provide for the
issuance of the shares upon the exercise of this Warrant, from time to time,
will take all steps necessary to amend its Certificate of Incorporation (the
"Certificate") to provide sufficient reserves of shares of Common Stock issuable
upon the exercise of the Warrant. The Company further covenants that all shares
that may be issued upon the exercise of rights represented by this Warrant, upon
exercise of the rights represented by this Warrant and payment of the Exercise
Price, all as set forth herein, will be free from all taxes, liens and charges
in respect of the issue thereof (other than taxes in respect of any transfer
occurring contemporaneously or otherwise specified herein). The Company agrees
that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the shares of Common Stock upon
the exercise of this Warrant.
9. Notices.
(a) Whenever the Exercise Price or number of shares purchasable
hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall
issue a certificate signed by its Chief Financial Officer setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the Exercise
Price and number of shares purchasable hereunder after giving effect to such
adjustment, and shall cause a copy of such certificate to be mailed (by
first-class mail, postage prepaid) to the Holder of this Warrant.
(b) All notices, advices and communications under this Warrant shall
be deemed to have been given, (i) in the case of personal delivery, on the date
of such delivery and (ii) in the case of mailing, on the third business day
following the date of such mailing, addressed as follows:
If to the Company:
NAL Financial Group Inc.
500 Cypress Creek Road West, Suite 590
Ft. Lauderdale, FL 33309
Attention: Mr. Robert R. Bartolini
<PAGE>
With a Copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll, Professional Corporation
Two Logan Square, 12th Floor
18th & Arch Streets
Philadelphia, PA 19103-2771
and to the Holder:
at the address of the Holder appearing on the books
of the Company or the Company's transfer agent, if
any.
Either of the Company or the Holder may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Paragraph 9.
10. Amendments.
(a) Any term of this Warrant may be amended with the written
consent of the Company and the Holder. Any amendment effected in accordance with
this Section 10 shall be binding upon the Holder, each future holder and the
Company.
(b) No waivers of, or exceptions to, any term, condition or
provision of this Warrant, in any one or more instances, shall be deemed to be,
or construed as, a further or continuing waiver of any such term, condition or
provision.
11. Adjustments. The number of Shares of Common Stock purchasable
hereunder and the Exercise Price is subject to adjustment from time to time upon
the occurrence of certain events, as follows:
11.1. Reorganization, Merger or Sale of Assets. If at any time
while this Warrant, or any portion thereof, is outstanding and unexpired there
shall be (i) a reorganization (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for herein), (ii) a merger
or consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which the
Company is the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, or (iii) a sale or transfer of substantially all of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such reorganization, merger, consolidation, sale or transfer,
lawful provision shall be made so that the holder of this Warrant shall
thereafter be entitled to receive upon payment of the Exercise Price then in
effect, the number of shares of stock or other securities or property of the
successor corporation resulting from such reorganization, merger, consolidation,
sale or transfer that a holder of the shares deliverable upon exercise of this
Warrant would have been entitled to receive in such reorganization,
consolidation, merger, sale or transfer if this Warrant had been exercised
immediately before such reorganization, merger, consolidation, sale or transfer,
all subject to further adjustment as provided in this Section 11. The foregoing
provisions of this Section 11.1 shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the stock
or securities of any other corporation that are at the time receivable upon the
exercise of this Warrant. If the per-share consideration payable to the Holder
hereof for shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such consideration shall
be determined in good faith by the Company's Board of Directors. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Holder after the transaction, to
the end that the provisions of this Warrant shall be applicable after that
event, as near as reasonably may be, in relation to any shares or other property
deliverable after that event upon exercise of this Warrant.
<PAGE>
11.2. Reclassification. If the Company, at any time while this
Warrant, or any portion thereof, remains outstanding and unexpired, by
reclassification of securities or otherwise, shall change any of the securities
as to which purchase rights under this Warrant exist into the same or a
different number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefor shall be appropriately adjusted, all subject to further
adjustment as provided in this Section 11.
11.3. Split, Subdivision or Combination of Shares. If the Company
at any time while this Warrant, or any portion thereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase
rights under this Warrant exist, into a different number of securities of the
same class, the Exercise Price and the number of shares issuable upon exercise
of this Warrant shall be proportionately adjusted.
11.4. Adjustments for Dividends in Stock or Other Securities or
Property. If while this Warrant, or any portion hereof, remains outstanding and
unexpired the holders of the securities as to which purchase rights under this
Warrant exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible Stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend, then
and in each case, this Warrant shall represent the right to acquire, in addition
to the number of shares of the security receivable upon exercise of this
Warrant, and without payment of any additional consideration therefor, the
amount of such other or additional stock or other securities or property (other
than cash) of the Company that such holder would hold on the date of such
exercise had it been the holder of record of the security receivable upon
exercise of this Warrant on the date hereof and had thereafter, during the
period from the date hereof to and including the date of such exercise, retained
such shares and/or all other additional stock, other securities or property
available by this Warrant as aforesaid during such period.
<PAGE>
11.5. Cumulative Adjustments for Issuance(s) of Shares.
(a) If at any time between the Warrant Issue Date and the date
upon which this Warrant is exercised, in whole or in part ("Exercise Date"), the
Company shall offer and sell Additional Shares of Common Stock (as hereinafter
defined) for cash consideration in a private or public sale transaction(s), then
immediately prior to the exercise of the Warrant, in whole or in part, the
Exercise Price Per Share as adjusted pursuant to Section 11.1 through 11.5, if
any (the "Adjusted Exercise Price Per Share") and the number of shares issuable
upon exercise shall be adjusted only in the event that the average consideration
per share ("Average Sales Price Per Share") received by the Company upon such
sale(s) on a cumulative basis (as adjusted to take into account the effect of
any adjustments under Section 11.1 through 11.4) is less than the Exercise Price
on the Warrant Issue Date.
The Adjusted Exercise Price per Share as adjusted in conjunction
with the exercise of this Warrant on the Exercise Date shall equal the product
of the Exercise Price Per Share on the Warrant Issue Date multiplied by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding on the Warrant Issue Date (as adjusted to take into account the
effect of any adjustment under Sections 11.1 through 11.4 during the period from
the Warrant Issue Date to the Exercise Date, if any) plus the number of shares
of Common Stock which the aggregate consideration received for the issuance(s)
or sale(s) of the Additional Shares of Common Stock during the period from the
Warrant Issue Date to the Exercise Date would purchase at the Adjusted Exercise
Price Per Share on the Warrant Issue Date, and the denominator of which shall be
the number of shares of Common Stock outstanding after taking into account the
Additional Shares of Common Stock (including upon exercise of warrants and
conversion of Convertible Securities).
(b) For the purpose of this Section 11.5, the consideration
received by the Company for any issue or sale of securities shall, (i) to the
extent it consists of cash, be computed at the gross amount of cash received by
the Company before deduction of any underwriting or similar commissions,
concessions or compensation paid or allowed by the Company in connection with
such issue or sale, (ii) to the extent it consists of a service or property
other than cash, be computed at the fair value of that service or property as
determined in good faith by the Board of Directors; and (iii) if Additional
Shares of Common Stock, Convertible Securities (as hereinafter defined), or
rights or options to purchase either Additional Shares of Common Stock or
Convertible Securities are issued or sold together with other stock or
securities or other assets of the Company for a consideration that covers both,
be computed as the portion of the consideration so received that may be
reasonably determined in good faith by the Board to be allocable to such
Additional Shares of Common Stock, Convertible Securities or rights or options.
(c) For the purpose of the calculations provided in this Section
11.5, if at any time or from time to time after the Warrant Issue Date the
Company shall issue any rights or options for the purchase of, or stock or other
securities convertible into, Additional Shares of Common Stock (such Common
Stock or securities being hereinafter referred to as "Convertible Securities"),
then, and in each case, if the Effective Price (as hereinafter defined) of such
rights, options or Convertible Securities shall be less than the Exercise Price,
the Company shall be deemed to have issued at the time of the issuance of such
rights or options or Convertible Securities the maximum number of Additional
Shares of Common Stock issuable upon exercise or conversion thereof and to have
received as consideration for the issuance of such shares an amount equal to the
total amount of the consideration, if any, payable to the Company upon exercise
or conversion of such options or rights. "Effective Price" shall mean the
quotient determined by dividing the total of all of such consideration by such
maximum number of Additional Shares of Common Stock. No further adjustment shall
be made as a result of the actual issuance of Additional Shares of Common Stock
on the exercise of any such rights or options or the conversion of any such
Convertible Securities. In the case of Convertible Securities which have a
conversion price which is based, in whole or in part, upon a discount to the
market price or value of the Common Stock, then for the purposes of calculating
the Effective Price, the consideration shall be deemed to include the minimum
conversion price payable to the Company.
<PAGE>
If any such rights or options or the conversion privilege
represented by any such Convertible Securities shall expire without having been
exercised, the adjustment to the number of shares available hereunder upon the
issuance of such rights, options or Convertible Securities shall be readjusted
to the number of shares that would have been in effect had an adjustment been
made on the basis that the only Additional Shares of Common Stock so issued were
the Additional Shares of Common Stock, if any, actually issued or sold on the
exercise of such rights or options or rights of conversion of such Convertible
Securities, and such Additional Shares of Common Stock, if any, were issued or
sold for the consideration actually received by the Company for the granting of
all such rights or options, whether or not exercised, plus the consideration
received for issuing or selling the Convertible Securities actually converted
plus the consideration, if any, actually received by the Company on the
conversion of such Convertible Securities.
(d) For the purpose of the calculations provided for in this
Section 11.5, if at any time or from time to time after the Warrant Issue Date
the Company shall issue any rights or options for the purchase of Convertible
Securities, then, in each such case, if the Effective Price thereof is less than
the then Exercise Price, the Company shall be deemed to have issued at the time
of the issuance of such rights or options the maximum number of Additional
Shares of Common Stock issuable upon conversion of the total amount of
Convertible Securities covered by such rights or options and to have received as
consideration for the issuance of such Additional Shares of Common Stock an
amount equal to the amount of consideration, if any, received by the Company for
the issuance of such rights or options, plus the consideration, if any, payable
to the Company upon the conversion of such Convertible Securities. "Effective
Price" shall mean the quotient determined by dividing the total amount of such
consideration by such maximum number of Additional Shares of Common Stock. No
further adjustment of such Exercise Price adjusted upon the issuance of such
rights or options shall be made as a result of the actual issuance of the
Convertible Securities upon the exercise of such rights or options or upon the
actual issuance of Additional Shares of Common Stock upon the conversion of such
Convertible Securities.
The provisions of subsection (c) above for readjustment upon the
expiration of rights or options or the rights of conversion of Convertible
Securities, shall apply mutatis mutandis to the rights, options and Convertible
Securities referred to in this subsection (d).
<PAGE>
(e) Upon each adjustment in the Exercise Price or the Adjusted
Exercise Price, as applicable, the number of shares of Common Stock purchasable
hereunder shall be adjusted, to the nearest one hundredth of a whole share, to
the product obtained by multiplying such number of shares purchasable
immediately prior to such adjustment in the Exercise Price by a fraction, the
numerator of which shall be the Exercise Price immediately prior to such
adjustment and the denominator of which shall be the Exercise Price immediately
thereafter. For purposes of any calculation under this subsection, the Exercise
Price and the adjusted Exercise Price shall be determined to the nearest
ten-thousandth of a cent.
(f) The term "Additional Shares of Common Stock" as used herein
shall mean all shares of Common Stock issued or deemed issued by the Company
after the Warrant Issue Date, other than (i) securities issued pursuant to or in
connection with the Securities Purchase Agreement dated of even date herewith,
by and among the Company and the Great American Reserve Insurance Company,
Beneficial Standard Life Insurance Company and Conseco, Inc., and the debentures
issued thereunder; (ii) shares of Common Stock issued upon conversion of
convertible securities or the exercise of common stock purchase warrants
outstanding as of the Warrant Issue Date; (iii) shares of Common Stock issuable
to employees, officers or directors pursuant to the Company's stock option plan;
(iv) shares of Common Stock issued or issuable to directors in connection with
their service as directors; (v) shares of Common Stock issued or issuable to
directors, officers or employees for services rendered or to be rendered
pursuant to arrangements approved by the Board of Directors; and (vii) shares of
Common Stock issued in connection with a business combination, merger,
consolidation, asset acquisition or the acquisition of the business of another
corporation (through the purchase of stock or assets) approved by the Board of
Directors.
11.6 The Company will not, by any voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good faith assist
in the carrying out of all the provisions of this Section 11 and in the taking
of all such action as may be necessary or appropriate in order to protect the
rights of the Holders of this Warrant against impairment.
12. Registration Rights. The Holder shall be entitled to the
registration rights set forth in that certain Registration Rights Agreement of
even date herewith by and between the Company and such Holder.
13. Severability. Whenever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this Warrant
in such jurisdiction or affect the validity, legality or enforceability of any
provision in any other jurisdiction, but this Warrant shall be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
<PAGE>
14. Governing Law. The corporate law of the State of Delaware shall
govern all issues and questions concerning the relative rights of the Company
and its stockholders. All other questions concerning the construction, validity,
interpretation and enforceability of this Warrant and the exhibits and schedules
hereto shall be governed by, and construed in accordance with, the laws of the
State of Delaware, without giving effect to any choice of law or conflict of law
rules or provisions (whether of the State of Delaware or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Delaware.
15. Jurisdiction. The Holder and the Company agree to submit to
personal jurisdiction and to waive any objection as to venue in the federal or
state courts in Delaware located at or near New Castle County. Service of
process on the Company or the Holder in any action arising out of or relating to
this Warrant shall be effective if mailed to such party at the address listed in
Section 9 hereof.
16. Arbitration. If a dispute arises as to interpretation of this
Warrant, it shall be decided finally by three arbitrators in an arbitration
proceeding conforming to the Rules of the American Arbitration Association
applicable to commercial arbitration. The arbitrators shall be appointed as
follows: one by the Company, one by the Holder and the third by the said two
arbitrators, or, if they cannot agree, then the third arbitrator shall be
appointed by the American Arbitration Association. The third arbitrator shall be
chairman of the panel and shall be impartial. The arbitration shall take place
in Delaware located at or near New Castle County. The decision of a majority of
the Arbitrators shall be conclusively binding upon the parties and final, and
such decision shall be enforceable as a judgment in any court of competent
jurisdiction. Each party shall pay the fees and expenses of the arbitrator
appointed by it, its counsel and its witnesses. The parties shall share equally
the fees and expenses of the impartial arbitrator.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officers thereunto duly authorized.
Dated: September __, 1996
HOLDER: ______________________ NAL FINANCIAL GROUP INC.
By:_____________________________ By:_____________________________
___________________ Robert R. Bartolini
Executive Officer Chief Executive Officer
<PAGE>
NOTICE OF EXERCISE
TO: NAL FINANCIAL GROUP INC.
(1) The undersigned hereby elects to purchase _______ shares of Common
Stock of NAL FINANCIAL GROUP INC. pursuant to the terms of the attached Warrant,
and tenders herewith payment of the purchase price for such shares in full.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock to be issued upon conversion
thereof are being acquired solely for the account of the undersigned and not as
a nominee for any other party, and for investment, and that the undersigned will
not offer, sell or otherwise dispose of any such shares of Common Stock except
under circumstances that will not result in a violation of the Securities Act of
1933, as amended, or any state securities laws.
(3) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
-----------------------------------
(Name)
-----------------------------------
(Name)
(4) Please issue a new Warrant for the unexercised portion of the
attached Warrant in the name of the undersigned or in such other name as is
specified below:
-----------------------------------
(Name)
- -------------------- -----------------------------------
(Date) (Signature)
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT made and entered into as of this 12th day
of September, 1996, by and between NAL FINANCIAL GROUP INC., a Delaware
corporation (the "Company"), MERRILL LYNCH WORLD INCOME FUND, INC. ("MLW") and
CONVERTIBLE HOLDINGS, INC. ("CHI").
BACKGROUND
Pursuant to a Securities Purchase Agreement dated September 12, 1996
(the "Purchase Agreement"), by and among the Company, MLW and CHI, the Company
has issued to MLW and CHI, in the aggregate, a $5,000,000 principal amount
subordinated convertible debenture (the "Debenture"), and has issued to MLW and
CHI warrants (the "Warrants") to purchase an aggregate amount of shares of
62,500 Common Stock of the Company.
In order to induce MLW and CHI to enter into the foregoing transaction,
the Company has agreed to provide MLW and CHI with the rights set forth in this
Agreement.
Article 1. CERTAIN DEFINITIONS.
In addition to the other terms defined in this Agreement, the following
terms shall be defined as follows:
"Agreement" means this Registration Rights Agreement.
"Brokers' Transactions" has the meaning ascribed to such term pursuant
to Rule 144 under the Securities Act.
"Business Day" means any day on which the New York Stock Exchange
("NYSE") is open for trading.
"Common Stock" means any outstanding shares of Common Stock of the
Company, as well as any Shares issuable upon the conversion of the Debentures
and/or exercise of the Warrants.
"Company" means NAL Financial Group Inc., a Delaware corporation.
"Debenture" has the meaning ascribed in the Background section of this
Agreement.
"Demand Registrations" mean all registrations of Registrable Securities
covered by Section 2(a).
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC thereunder, all as the same shall be in
effect at the relevant time.
"Holders" mean MLW and CHI for so long as (and to the extent that) they
own any Registrable Securities, and each of their successors, assigns, and
direct and indirect transferees who become registered owners of Registrable
Securities or securities exercisable, exchangeable or convertible into
Registrable Securities.
"Mandatory Registration Statement" means a Mandatory Registration
Statement of the Company pursuant to the provisions of Section 2(a) of this
Agreement which covers Common Stock on an appropriate form then permitted by the
SEC to be used for such registration and the sales contemplated to be made
thereby under Rule 415 under the Securities Act, or any similar rule that may be
adopted by the SEC, and all amendments and supplements to such Registration
Statement, including pre and post-effective amendments thereto, in each case
including the prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Mandatory Registration" means a registration of Common Stock effected
pursuant to Section 2(a) hereof.
"Outstanding" means with respect to any securities as of any date, all
such securities therefore issued, except any such securities therefore canceled
or held by the Company or any successor thereto whether in its treasury or not)
or any affiliate of the Company or any successor thereto shall not be deemed
"Outstanding" for the purpose of this Agreement.
"Person" means an individual, a partnership (general or limited),
corporation, limited liability company, joint venture, business trust,
cooperative, association or other form of business organization, whether or not
regarded as a legal entity under applicable law, a trust (inter vivos or
testamentary), an estate of a deceased, insane or incompetent person, a
quasi-governmental entity, a government or any agency, authority, political
subdivision or other instrumentality thereof, or any other entity.
"Registrable Security(ies)" means all or any portions of any shares of
Common Stock or other equity securities of the Company that may be issued upon
the conversion of, or in exchange for, the Debentures, upon exercise of the
Warrants and any additional shares of Common Stock or other equity securities of
the Company issued or issuable after the date hereof in respect of any such
securities (or other equity securities issued in respect thereof) by way of a
stock dividend or stock split, in connection with a combination, exchange,
reorganization, recapitalization or reclassification of Company securities, or
pursuant to a merger, division, consolidation or other similar business
transaction or combination involving the Company; provided that: as to any
particular Registrable Securities, such securities shall cease to constitute
Registrable Securities (i) when a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of thereunder, or (ii) when and to the
extent all such securities are permitted to be distributed pursuant to Rule 144
(or any successor provision to such Rule) under the Securities Act without
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<PAGE>
any volume restrictions or other limitations upon resale, or are otherwise
freely transferable to the public without further registration under the
Securities Act and are not subject to any limitations on the amount of sales
under Rule 144 or (iii) when such securities shall have ceased to be Outstanding
and, in the case of clause (ii), the Company shall, if requested by the Holder
or Holders thereof, have delivered to such Holder or Holders the written opinion
of independent counsel to the Company to such effect. Any time this Agreement
requires the vote or consent of the Holder of a "majority" or other stated
percentage of the Registrable Securities, the term Registrable Securities shall,
solely for purposes of calculating such vote, be deemed to include the
Registrable Securities then issuable under the Debenture, upon exercise of the
Warrants, and any other securities exercisable or exchangeable for, or
convertible into, Registrable Securities.
"Registration Date" means the earlier of the dates identified in
subparagraphs (A) or (B) below:
(A) means that date which occurs on the earlier of (i) March 31, 1997;
or (ii) one hundred and twenty (120) days after the completion of an
underwritten primary public offering presently being prepared by the Company
(and anticipated to occur during the fourth quarter of 1996); or
(B) the first date upon which Conseco, Inc. or any affiliates thereof
exercise any of the registration rights as provided in the Securities Purchase
Agreement entered into between Conseco, Inc. and certain affiliates thereof and
the Company as of April 23, 1996.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with the registration requirements set forth in
this Agreement including, without limitation, the following: (i) the fees,
disbursements and expenses of the Company's counsel(s), accountants, and experts
in connection with the registration under the Securities Act of Registrable
Securities; (ii) all expenses in connection with the preparation, printing and
filing of the registration statement, any preliminary prospectus or final
prospectus, any other offering documents and amendments and supplements thereto,
and the mailing and delivery of copies thereof to the underwriters and dealers,
if any; (iii) the cost of printing or producing any agreement(s) among
underwriters, underwriting agreement(s) and blue sky or legal investment
memoranda, any selling agreements, and any other documents in connection with
the offering, sale or delivery of Registrable Securities to be disposed of; (iv)
any other expenses in connection with the qualification of Registrable
Securities for offer and sale under state securities laws, including the fees
and disbursements of counsel for the underwriters in connection with such
qualification and in connection with any blue sky and legal investment surveys;
(v) the filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of Registrable
Securities to be disposed of and any blue sky registration or filing fees, and
(vi) the fees and expenses incurred in connection with the listing of
Registrable Securities on each securities exchange (or NASDAQ National Market
System) on which Company securities of the same class are then listed; provided,
however, that Registration Expenses with respect to any registration pursuant to
this Agreement shall not include (x) expenses of any Holder's counsel, or (y)
any underwriting discounts or commissions attributable to Registrable
Securities, each of which shall be borne by the Holder.
3
<PAGE>
"SEC" means the United States Securities and Exchange Commission, or
such other federal agency at the time having the principal responsibility for
administering the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder, all as the same shall be in effect
at the relevant time.
Article 2. MANDATORY REGISTRATION.
(a) The Company shall not later than the Registration Date file with
the SEC to register for resale under the Securities Act the Registrable
Securities held by (or then issuable to) the Holders for sale pursuant to a
Mandatory Registration. The Company will use its best efforts to have the
Mandatory Registration declared effective as soon thereafter as is practicable.
The Company agrees to use its best efforts to keep the Mandatory Registration
Statement continuously effective until the third anniversary of the Mandatory
Registration Statement's effective date with the SEC or such shorter period that
will terminate when all of the Registrable Securities covered by the Mandatory
Registration Statement have been sold pursuant to the Mandatory Registration
Statement. The Company further agrees to supplement or amend the Mandatory
Registration Statement if required by the rules, regulations or instructions
applicable to the registration form used by the Company for such Mandatory
Registration Statement or by the 1993 Act or by any other rules and regulations
thereunder for shelf registration or if reasonably requested by Holders with
respect to information relating to such Holders, and to use its best efforts to
cause any such amendment to become effective and such Mandatory Registration
Statement to become usable as soon as thereafter practicable. The Company agrees
to furnish to the Holders of Registrable Securities copies of any such
supplement or amendment promptly after its being used or filed with the SEC.
Notwithstanding anything to the contrary contained herein, the Company's
obligation above shall extend only to the inclusion of the Registrable
Securities in a registration statement filed under the Securities Act. The
Company shall have no obligation to assure the terms and conditions of
distribution, to obtain a commitment from an underwriter relative to the sale of
the Registrable Securities or to otherwise assume any responsibility for the
manner, price or terms of the distribution of the Registrable Securities.
(b)(i) If following the Registration Date an underwritten secondary
public offering (the "Offering") is to be undertaken by the Company on behalf of
Conseco, Inc. and any affiliates thereof, including Great American Reserve
Insurance Company and/or Beneficial Standard Life Insurance Company (in the
aggregate, "Conseco") pursuant to demand rights granted by the Company to
Conseco or any of its affiliates under existing Registration Rights Agreements
dated April 23, 1996 and the Holders receive written notification (the
"Notification") from Conseco and the managing underwriter of such Offering: (A)
that in the opinion of such underwriter the success of the proposed offering
will be materially adversely effected by virtue of the public resale rights
granted to the Holders pursuant to subparagraph 2(a) above; and (B) inviting
inclusion in the Offering of Registrable Securities of the Holders to be offered
and sold on the same terms as are being offered by Conseco; then, and in that
event, in modification of the rights granted under subparagraph (2)(a) above,
the Holders may either: (i)
4
<PAGE>
include the Registrable Securities covered by such Notification in the Offering
on the same terms and conditions as have been offered to Conseco and thereafter
concurrently suspend sales of the Registrable Securities pursuant to the
Mandatory Registration Statement (and if the Offering does not include 100% of
the Registrable Securities, then resales thereof pursuant to the Mandatory
Registration Statement may not commence until up to 120 days following the
closing date of the Offering, in the discretion of the managing underwriter); or
(ii) if the Holder elects not to include the Registrable Securities covered by
the Notification in the Offering, it shall agree to suspend sales of the
Registrable Securities covered by the Mandatory Registration Statement until up
to 120 days following the closing date of the offering (in the discretion of the
managing underwriter);
(b)(ii) If in the underwritten secondary Offering the managing
underwriter advises the Company in writing that in its opinion, based upon
market and other conditions, the offering cannot include 100% of the Registrable
Securities of the Holders and 100% of the securities of Conseco, then the
Company shall include in such Offering such number of securities of Conseco and
the Holders as are determined in the discretion of the managing underwriter,
with the relevant percentage of such securities to be offered on behalf of
Conseco and the Holders to be determined in accordance with the ratio in which
Conseco and the Holders have provided in aggregate principal amount debenture
financing to the Company.
Article 3. REGISTRATION PROCEDURES.
Whenever the Holders of Registrable Securities have requested that any
Registrable Securities be registered pursuant to this Agreement, the Company
shall use its best efforts to effect the registration of the resale of such
Registrable Securities and pursuant thereto the Company shall as soon as
practicable:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to the resale of such Registrable Securities
and use its best efforts to cause such registration statement to become
effective (provided that before filing a registration statement or prospectus or
any amendments or supplements thereto, the Company shall furnish to the counsel
selected by the Holders of a majority of the Registrable Securities covered by
such registration statement copies of all such documents proposed to be filed,
which documents shall be subject to the review and consent of such counsel);
(b) notify each Holder of Registrable Securities promptly and, if
requested by any such Holder or counsel, confirm such advice in writing (i) when
a Registration Statement has become effective and when any post-effective
amendment thereto has been filed and becomes effective, (ii) of any request by
the SEC or any state securities authority for amendments and supplements to a
Registration Statement and prospectus or for additional information after the
Registration Statement has become effective, (iii) of the issuance by the SEC or
any state securities authority of any stop order suspending the effectiveness of
a Registration Statement or the initiation of any proceedings for that purpose,
(iv) if, between the effective date of a Registration Statement and the closing
of any sale of Registrable Securities covered thereby, the representations and
warranties of the Company contained in any underwriting agreement, securities
sales agreement or other similar agreement, if any, relating to the offering
cease to be true and correct in all material respects or if the Company receives
any notification with respect to
5
<PAGE>
the suspension of the qualification of the Registrable Securities for sale in
any jurisdiction or the initiation of any proceeding for such purpose, (v) of
the happening of any event during the period a Registration Statement is
effective which makes any statement made in such Registration Statement or the
related prospectus untrue in any material respect or which requires the making
of any changes in such Registration Statement or prospectus in order to make the
statements therein not misleading and (vi) of any determination by the Company
that a post-effective amendment to a Registration Statement would be
appropriate;
(c) upon the occurrence of any event contemplated by Section (b) above,
use its best efforts to prepare a supplement or post-effective amendment to a
Registration Statement or the related prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities, such prospectus will
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Company agrees to notify the
Holders to suspend use of the prospectus as promptly as practicable after the
occurrence of such an event, and the Holders hereby agree to suspend use of the
prospectus until the Company has amended or supplemented the prospectus to
correct such misstatement or omission, which the Company shall effect without
delay;
(d) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(e) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any Holder reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate the
disposition of the Registrable Securities owned by the sellers in such
jurisdictions (provided that the Company shall not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this subparagraph, (ii) subject itself to taxation
in any such jurisdiction or (iii) consent to general service of process in any
such jurisdiction);
(f) notify each seller of such Registrable Securities, at any time when
a prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such registration statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not misleading, and,
at the request of any such seller, the Company shall prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such prospectus shall not contain an untrue
statement of a material fact or omit to state any fact necessary to make the
statements therein not misleading;
(g) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed;
6
<PAGE>
(h) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(i) make available for inspection during normal business hours by any
seller of Registrable Securities, any underwriter participating in any
disposition pursuant to such registration statement and any attorney, accountant
or other agent retained by any such seller or underwriter, all financial and
other records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors, employees and independent accountants
to supply all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration statement;
and
(j) notify Conseco, Inc. promptly in writing of the filing of a
Mandatory Registration Statement with the SEC on behalf of the Holders.
Article 4. REGISTRATION EXPENSES.
All Registration Expenses in connection with any of the registration
events identified within this Agreement shall be borne by the Company. All other
expenses shall be borne by the Holders.
Article 5. INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted by law,
each Holder of Registrable Securities, its officers and directors and each
Person who controls such Holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue statement of material fact contained in any registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or any omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same are caused by or contained in any information furnished to the Company by
such Holder for use therein or by such Holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished such holder with a sufficient number of copies
of the same. In connection with an underwritten offering, the Company shall
provide reasonable and customary indemnification to such underwriters, their
officers and directors and each Person who controls such underwriters (within
the meaning of the Securities Act) to the same extent as provided above with
respect to the indemnification of the Holders of Registrable Securities.
(b) In connection with any registration statement in which a Holder of
Registrable Securities is participating, each such Holder shall furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration
7
<PAGE>
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or omission is
contained in any written information or affidavit so furnished by such Holder;
provided that the obligation to indemnify shall be individual, not joint and
several, for each Holder and shall be limited to the net amount of proceeds
received by such Holder from the sale of Registrable Securities pursuant to such
registration statement.
(c) Any Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give prompt notice
shall not impair any Person's right to indemnification hereunder to the extent
such failure has not prejudiced the indemnifying party) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement shall remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and shall survive the transfer of securities. The Company also
agrees to make such provisions, as are reasonably requested by any indemnified
party, for contribution to such party in the event the Company's indemnification
is unavailable for any reason.
Article 6. OBLIGATION OF HOLDERS.
(a) In connection with each registration hereunder, each selling Holder
will furnish to the Company in writing such information with respect to such
seller and the securities held by such seller, and the proposed distribution by
them as shall be reasonably requested by the Company in order to assure
compliance with federal and applicable state securities laws, as a condition
precedent to including such seller's Registrable Securities in the registration
statement. Each selling Holder also shall agree to promptly notify the Company
of any changes in such information included in the registration statement or
prospectus as a result of which there is an untrue statement of material fact or
an omission to state any material fact required or necessary to be stated
therein in order to make the statements contained therein not misleading in
light of the circumstances then existing.
(b) In connection with each registration pursuant to this Agreement,
the Holders included therein will not effect sales thereof until notified by the
Company of the effectiveness of
8
<PAGE>
the registration statement, and thereafter will suspend such sales after receipt
of telegraphic or written notice from the Company to suspend sales to permit the
Company to correct or update a registration statement or prospectus. At the end
of any period during which the Company is obligated to keep a registration
statement current, the Holders included in said registration statement shall
discontinue sales of shares pursuant to such registration statement upon receipt
of notice from the Company of its intention to remove from registration the
shares covered by such registration statement which remain unsold, and such
Holders shall notify the Company of the number of shares registered which remain
unsold immediately upon receipt of such notice from the Company.
Article 7. MISCELLANEOUS.
(a) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to that state's
conflict of laws provisions.
(b) Counterparts. This Agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
(c) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given
without the written consent of the Company and the Holders.
(d) Notices. All communications under this Agreement shall be
sufficiently given if delivered by hand or by overnight courier or mailed by
registered or certified mail, postage prepaid, addressed,
9
<PAGE>
(i) if to the Company, to:
NAL Financial Group Inc.
500 Cypress Creek Road West
Suite 590
Ft. Lauderdale, FL 33309
Attention: President
with a copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll Professional Corporation
1200 Two Logan Square
18th and Arch Streets
Philadelphia, PA 19103
or, in the case of the Holders, at such address as each such Holder shall have
furnished in writing to the Company; or at such other address as any of the
parties shall have furnished in writing to the other parties hereto;
(e) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(f) Entire Agreement; Survival; Termination. This Agreement is intended
by the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
(g) Jurisdiction. The Company and Holders agree to submit to personal
jurisdiction and to waive any objection as to venue in the federal or state
courts in the County of New Castle, State of Delaware. Service of process on the
Company or the Holders in any action arising out of or relating to this
Agreement shall be effective if mailed to such party at the address listed in
paragraph 10(d) above.
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<PAGE>
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
have executed this Agreement as of the date first written above.
NAL FINANCIAL GROUP INC.
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
MERRILL LYNCH WORLD INCOME FUND, INC.
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
CONVERTIBLE HOLDINGS, INC.
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
11
<PAGE>
NOTICE SCHEDULE:
List of Holders:
- ----------------
12
EXECUTION COPY
This ADMINISTRATION AGREEMENT dated as of September 11, 1996, among
NAL AUTO TRUST 1996-3, a Delaware business trust (the "Issuer"), NAL
ACCEPTANCE CORPORATION, a Delaware corporation, as administrator (the
"Administrator"), and BANKERS TRUST COMPANY, a New York banking
corporation, not in its individual capacity but solely as Indenture
Trustee (the "Indenture Trustee"),
W I T N E S S E T H :
WHEREAS, the Issuer is issuing the 7.30% Asset Backed Notes (the "Notes")
pursuant to the Indenture dated as of September 11, 1996 (as amended and
supplemented from time to time, the "Indenture"), between the Issuer and the
Indenture Trustee (capitalized terms used and not otherwise defined herein shall
have the meanings assigned to such terms in the Indenture);
WHEREAS, the Issuer has entered into certain agreements in connection with
the issuance of the Notes and of certain beneficial ownership interests in the
Issuer, including (i) a Sale and Servicing Agreement dated as of September 11,
1996 (as amended and supplemented from time to time, the "Sale and Servicing
Agreement"), among the Issuer, NAL Acceptance Corporation, as servicer, Bankers
Trust Company, as back-up servicer, and Autorics II, Inc., as depositor (the
"Depositor"), and (ii) the Indenture (the Sale and Servicing Agreement and the
Indenture being referred to hereinafter collectively as the "Related
Agreements");
WHEREAS, pursuant to the Related Agreements, the Issuer and the Owner
Trustee are required to perform certain duties in connection with (a) the Notes
and the collateral therefor pledged pursuant to the Indenture (the "Collateral")
and (b) the beneficial ownership interests in the Issuer (the registered holders
of such interests being referred to herein as the "Owners");
WHEREAS, the Issuer and the Owner Trustee desire to have the Administrator
perform certain of the duties of the Issuer and the Owner Trustee referred to in
the preceding clause and to provide such additional services consistent with the
terms of this Agreement and the Related Agreements as the Issuer and the Owner
Trustee may from time to time request; and
WHEREAS, the Administrator has the capacity to provide the services
required hereby and is willing to perform such services for the Issuer and the
Owner Trustee on the terms set forth herein;
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties agree as follows:
1. Duties of the Administrator. (a) Duties with Respect to the Indenture.
(i) The Administrator agrees to perform all its duties as Administrator. In
addition, the Administrator shall consult with the Owner Trustee regarding the
duties of the Issuer or the Owner Trustee under the Indenture. The Administrator
shall monitor the performance of the Issuer and shall advise the Owner Trustee
when action is necessary to comply with the Issuer's or the Owner Trustee's
duties under the Indenture. The Administrator shall prepare for execution by the
Issuer, or shall cause the preparation by other appropriate persons of, all such
documents, reports, filings, instruments, certificates and opinions that it
shall be the duty of the Issuer or the Owner Trustee to prepare, file or deliver
pursuant to the Indenture. In furtherance of the foregoing, the Administrator
shall take all appropriate action that is the duty of the Issuer or the Owner
Trustee to take pursuant to the Indenture including, without limitation, such of
the foregoing as are required with respect to the following matters under the
Indenture (references are to sections of the Indenture):
(A) the duty to cause the Note Register to be kept and to give the
Indenture Trustee notice of any appointment of a new Note Registrar and the
location, or change in location, of the Note Register (Section 2.05);
(B) the notification of Noteholders of the final principal
payment on their Notes (Section 2.08(b));
(C) the fixing or causing to be fixed of any special record date and the
notification of the Noteholders with respect to special payment dates, if any
(Section 2.08(c));
(D) the preparation of or obtaining of the documents and instruments
required for authentication of the Notes and delivery of the same to the
Indenture Trustee (Section 2.02);
(E) the maintenance of an office in the Borough of Manhattan, City of New
York, for registration of transfer or exchange of Notes (Section 3.02);
(F) the duty to cause newly appointed Paying Agents, if any, to deliver to
the Indenture Trustee the instrument specified in the Indenture regarding funds
held in trust (Section 3.03);
(G) the direction to the Indenture Trustee to deposit moneys with Paying
Agents, if any, other than the Indenture Trustee (Section 3.03);
(H) the obtaining and preservation of the Issuer's qualification to do
business in each jurisdiction in which such
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<PAGE>
qualification is or shall be necessary to protect the validity and
enforceability of the Indenture, the Notes, the Collateral and each other
instrument and agreement included in the Trust Estate (Section 3.04);
(I) the preparation of all supplements and amendments to the Indenture and
all financing statements, continuation statements, instruments of further
assurance and other instruments and the taking of such other action as is
necessary or advisable to protect the Trust Estate (Section 3.05);
(J) the delivery of the Opinion of Counsel on the Closing Date and the
annual delivery of Opinions of Counsel as to the Trust Estate, and the annual
delivery of the Officer's Certificate and certain other statements as to
compliance with the Indenture (Sections 3.06 and 3.09);
(K) the identification to the Indenture Trustee in an Officer's
Certificate of a Person with whom the Issuer has contracted to perform its
duties under the Indenture (Section 3.07(b));
(L) the notification of the Indenture Trustee and the Rating Agencies of a
Servicer Default under the Sale and Servicing Agreement and, if such Servicer
Default arises from the failure of the Servicer to perform any of its duties
under the Sale and Servicing Agreement with respect to the Receivables, the
taking of all reasonable steps available to remedy such failure (Section
3.07(d));
(M) the duty to cause the Servicer to comply with Sections 4.09, 4.10,
4.11 and Article IX of the Sale and Servicing Agreement (Section 3.14);
(N) the preparation and obtaining of documents and instruments required
for the release of the Issuer from its obligations under the Indenture (Section
3.11(b));
(O) the delivery of written notice to the Indenture Trustee and the Rating
Agencies of each Event of Default under the Indenture and each default by the
Servicer or the Depositor under the Sale and Servicing Agreement (Section 3.19);
(P) the monitoring of the Issuer's obligations as to the satisfaction and
discharge of the Indenture and the preparation of an Officer's Certificate and
the obtaining of the Opinion of Counsel and the Independent Certificate relating
thereto (Section 4.01);
(Q) the compliance with any written directive of the Indenture Trustee
with respect to the sale of the Trust Estate in a commercially reasonable manner
if an Event of Default shall have occurred and be continuing (Section 5.04);
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<PAGE>
(R) the preparation and delivery of notice to Noteholders of the removal
of the Indenture Trustee and the appointment of a successor Indenture Trustee
(Section 6.08);
(S) the preparation of any written instruments required to confirm more
fully the authority of any co-trustee or separate trustee and any written
instruments necessary in connection with the resignation or removal of any
co-trustee or separate trustee (Sections 6.08 and 6.10);
(T) the furnishing of the Indenture Trustee with the names and addresses
of Noteholders during any period when the Indenture Trustee is not the Note
Registrar (Section 7.01);
(U) the opening of one or more accounts in the Issuer's name, the
preparation and delivery of Issuer Orders, Officer's Certificates and Opinions
of Counsel and all other actions necessary with respect to investment and
reinvestment of funds in the Trust Accounts (Sections 8.02 and 8.03);
(V) the preparation of an Issuer Request and Officer's Certificate and the
obtaining of an Opinion of Counsel and Independent Certificates, if necessary,
for the release of the Trust Estate (Sections 8.04 and 8.05);
(W) the preparation of Issuer Orders and the obtaining of Opinions of
Counsel with respect to the execution of supplemental indentures and the mailing
to the Noteholders of notices with respect to such supplemental indentures
(Sections 9.01, 9.02 and 9.03);
(X) the execution and delivery of new Notes conforming to any supplemental
indenture (Section 9.05);
(Y) the duty to notify Noteholders of redemption of the Notes or to cause
the Indenture Trustee to provide such notification (Section 10.02);
(Z) the preparation and delivery of all Officer's Certificates and
Opinions of Counsel with respect to any requests by the Issuer to the Indenture
Trustee to take any action under the Indenture (Section 11.01);
(AA) the notification of the Rating Agencies, upon the failure of the
Indenture Trustee to give such notification, of the information required
pursuant to Section 11.04 of the Indenture (Section 11.04);
(BB) the preparation and delivery to Noteholders and the Indenture Trustee
of any agreements with respect to alternate payment and notice provisions
(Section 11.06);
(CC) the recording of the Indenture, if applicable (Section 11.15); and
4
<PAGE>
(DD) the delivery to each Noteholder of such information as may be
required to enable such holder to prepare its federal and state tax returns
(Section 6.06).
(ii) The Administrator will:
(A) pay the Indenture Trustee (and any separate trustee or co-trustee
appointed pursuant to Section 6.10 of the Indenture (a "Separate Trustee")) from
time to time reasonable compensation for all services rendered by the Indenture
Trustee or Separate Trustee, as the case may be, under the Indenture (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(B) except as otherwise expressly provided in the Indenture, reimburse the
Indenture Trustee or any Separate Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Indenture Trustee
or Separate Trustee, as the case may be, in accordance with any provision of the
Indenture (including the reasonable compensation, expenses and disbursements of
its agents and counsel), except any such expense, disbursement or advance as may
be attributable to its negligence or bad faith;
(C) indemnify the Indenture Trustee and its officers, directors, agents
and employees and any Separate Trustee and their respective agents for, and hold
them harmless against, any losses, liability or expense (including attorney's
fees and expenses) incurred by it in connection with the administration of the
trust created by the Indenture and the performance of its duties under the
Indenture; provided, that, the Administrator need not reimburse any expense or
indemnify against any loss, liability or expense incurred by the Indenture
Trustee through the Indenture Trustee's own willful misconduct, negligence or
bad faith; and
(D) pay the Owner Trustee (and any Indemnified Party, as defined in
Section 8.02 of the Trust Agreement) any amounts owed to it under Section 8.01
or 8.02 of the Trust Agreement.
(b) Additional Duties. (i) In addition to the duties of the Administrator
set forth above, the Administrator shall perform such calculations and shall
prepare or shall cause the preparation by other appropriate persons of, and
shall execute on behalf of the Issuer or the Owner Trustee, all such documents,
reports, filings, instruments, certificates and opinions that it shall be the
duty of the Issuer or the Owner Trustee to prepare, file or deliver pursuant to
the Related Agreements or Section 5.05(a), (b), (c) or (d) of the Trust
Agreement, and at the request of the Owner Trustee shall take all appropriate
action that it is the duty of the Issuer or the Owner Trustee to take pursuant
to the Related Agreements. In furtherance thereof, the Owner Trustee shall, on
behalf of itself and of the Issuer, execute and deliver to the Administrator and
to each successor Administrator appointed pursuant to the terms hereof, one or
more
5
<PAGE>
powers of attorney substantially in the form of Exhibit A hereto, appointing the
Administrator the attorney-in-fact of the Owner Trustee and the Issuer for the
purpose of executing on behalf of the Owner Trustee and the Issuer all such
documents, reports, filings, instruments, certificates and opinions. Subject to
Section 5 of this Agreement, and in accordance with the directions of the Owner
Trustee, the Administrator shall administer, perform or supervise the
performance of such other activities in connection with the Collateral
(including the Related Agreements) as are not covered by any of the foregoing
provisions and as are expressly requested by the Owner Trustee and are
reasonably within the capability of the Administrator.
(ii) Notwithstanding anything in this Agreement or the Related Agreements
to the contrary, the Administrator shall be responsible for promptly notifying
the Owner Trustee in the event that any withholding tax is imposed on the
Trust's payments (or allocations of income) to an Owner as contemplated in
Section 5.02(c) of the Trust Agreement. Any such notice shall specify the amount
of any withholding tax required to be withheld by the Owner Trustee pursuant to
such provision.
(iii) Notwithstanding anything in this Agreement or the Related Agreements
to the contrary, the Administrator shall be responsible for performance of the
duties of the Owner Trustee set forth in Section 5.05(a), (b), (c) and (d), the
penultimate sentence of Section 5.05 and Section 5.06(a) of the Trust Agreement
with respect to, among other things, accounting and reports to Owners; provided,
however, that the Owner Trustee shall retain responsibility for the distribution
of the Schedule K-1s necessary to enable each Owner to prepare its federal and
state income tax returns.
(iv) The Administrator shall satisfy its obligations with respect to
clauses (ii) and (iii) above by retaining, at the expense of the Trust payable
by the Administrator, a firm of independent public accountants (the
"Accountants") acceptable to the Owner Trustee, which shall perform the
obligations of the Administrator thereunder. In connection with paragraph (ii)
above, the Accountants will provide prior to December 31, 1996, a letter in form
and substance satisfactory to the Owner Trustee as to whether any tax
withholding is then required and, if required, the procedures to be followed
with respect thereto to comply with the requirements of the Code. The
Accountants shall be required to update the letter in each instance that any
additional tax withholding is subsequently required or any previously required
tax withholding shall no longer be required.
(v) The Administrator shall perform the duties of the Administrator
specified in Section 10.02 of the Trust Agreement required to be performed in
connection with the resignation or removal of the Owner Trustee, and any other
duties expressly required to be performed by the Administrator under the Trust
Agreement.
6
<PAGE>
(vi) In carrying out the foregoing duties or any of its other obligations
under this Agreement, the Administrator may enter into transactions or otherwise
deal with any of its affiliates; provided, however, that the terms of any such
transactions or dealings shall be in accordance with any directions received
from the Issuer and shall be, in the Administrator's opinion, no less favorable
to the Issuer than would be available from unaffiliated parties.
(c) Non-Ministerial Matters. (i) With respect to matters that in the
reasonable judgment of the Administrator are non-ministerial, the Administrator
shall not take any action unless within a reasonable time before the taking of
such action, the Administrator shall have notified the Owner Trustee of the
proposed action and the Owner Trustee shall not have withheld consent or
provided an alternative direction. For the purpose of the preceding sentence,
"non-ministerial matters" shall include, without limitation:
(A) the amendment of or any supplement to the Indenture;
(B) the initiation of any claim or lawsuit by the Issuer and the
compromise of any action, claim or lawsuit brought by or against the Issuer
(other than in connection with the collection of the Receivables);
(C) the amendment, change or modification of the Related Agreements;
(D) the appointment of successor Note Registrars, successor Paying Agents
and successor Indenture Trustees pursuant to the Indenture or the appointment of
successor Administrators or Successor Servicers, or the consent to the
assignment by the Note Registrar, Paying Agent or Indenture Trustee of its
obligations under the Indenture; and
(E) the removal of the Indenture Trustee.
(ii) Notwithstanding anything to the contrary in this Agreement, the
Administrator shall not be obligated to, and shall not, (x) make any payments to
the Noteholders under the Related Agreements, (y) sell the Trust Estate pursuant
to Section 5.04 of the Indenture or (z) take any other action that the Issuer
directs the Administrator not to take on its behalf.
2. Records. The Administrator shall maintain appropriate books of account
and records relating to services performed hereunder, which books of account and
records shall be accessible for inspection by the Issuer at any time during
normal business hours.
3. Compensation. As compensation for the performance of the
Administrator's obligations under this Agreement and as reimbursement for its
expenses related thereto, the Administrator
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<PAGE>
shall be entitled to $1,000 per annum which shall be solely an obligation of the
Servicer.
4. Additional Information To Be Furnished to the Issuer. The Administrator
shall furnish to the Issuer from time to time such additional information
regarding the Collateral as the Issuer shall reasonably request.
5. Independence of the Administrator. For all purposes of this Agreement,
the Administrator shall be an independent contractor and shall not be subject to
the supervision of the Issuer or the Owner Trustee with respect to the manner in
which it accomplishes the performance of its obligations hereunder. Unless
expressly authorized by the Issuer, the Administrator shall have no authority to
act for or represent the Issuer or the Owner Trustee in any way and shall not
otherwise be deemed an agent of the Issuer or the Owner Trustee.
6. No Joint Venture. Nothing contained in this Agreement (i) shall
constitute the Administrator and either of the Issuer or the Owner Trustee as
members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
7. Other Activities of Administrator. Nothing herein shall prevent the
Administrator or its Affiliates from engaging in other businesses or, in its
sole discretion, from acting in a similar capacity as an administrator for any
other person or entity even though such person or entity may engage in business
activities similar to those of the Issuer, the Owner Trustee or the Indenture
Trustee.
8. Term of Agreement; Resignation and Removal of Administrator. (a) This
Agreement shall continue in force until the dissolution of the Issuer, upon
which event this Agreement shall automatically terminate.
(b) Subject to Section 8(e), the Administrator may resign its duties
hereunder by providing the Issuer with at least 60 days' prior written notice.
(c) Subject to Section 8(e), the Issuer may remove the Administrator
without cause by providing the Administrator with at least 60 days' prior
written notice.
(d) Subject to Section 8(e), at the sole option of the Issuer, the
Administrator may be removed immediately upon written notice of termination from
the Issuer to the Administrator if any of the following events shall occur:
(i) the Administrator shall default in the performance of any of its
duties under this Agreement and, after notice of such
8
<PAGE>
default, shall not cure such default within ten days (or, if such default cannot
be cured in such time, shall not give within ten days such assurance of cure as
shall be reasonably satisfactory to the Issuer);
(ii) a court having jurisdiction in the premises shall enter a decree or
order for relief, and such decree or order shall not have been vacated within 60
days, in respect of the Administrator in any involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect or appoint a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for the Administrator or any substantial part
of its property or order the winding-up or liquidation of its affairs; or
(iii) the Administrator shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an involuntary case
under any such law, shall consent to the appointment of a receiver, liquidator,
assignee, trustee, custodian, sequestrator or similar official for the
Administrator or any substantial part of its property, shall consent to the
taking of possession by any such official of any substantial part of its
property, shall make any general assignment for the benefit of creditors or
shall fail generally to pay its debts as they become due.
The Administrator agrees that if any of the events specified in clauses
(ii) or (iii) of this Section shall occur, it shall give written notice thereof
to the Issuer and the Indenture Trustee within seven days after the happening of
such event.
(e) No resignation or removal of the Administrator pursuant to this
Section shall be effective until (i) a successor Administrator shall have been
appointed by the Issuer and (ii) such successor Administrator shall have agreed
in writing to be bound by the terms of this Agreement in the same manner as the
Administrator is bound hereunder.
(f) The appointment of any successor Administrator shall be effective only
after satisfaction of the Rating Agency Condition with respect to the proposed
appointment.
(g) Subject to Section 8(e) and 8(f), the Administrator acknowledges that
upon the appointment of a Successor Servicer pursuant to the Sale and Servicing
Agreement, the Administrator shall immediately resign and such Successor
Servicer shall automatically become the Administrator under this Agreement.
9. Action upon Termination, Resignation or Removal. Promptly upon the
effective date of termination of this Agreement pursuant to Section 8(a) or the
resignation or removal of the Administrator pursuant to Section 8(b) or (c),
respectively, the Administrator shall be entitled to be paid all fees and
reimbursable expenses accruing to it to the date of such
9
<PAGE>
termination, resignation or removal. The Administrator shall forthwith upon such
termination pursuant to Section 8(a) deliver to the Issuer all property and
documents of or relating to the Collateral then in the custody of the
Administrator. In the event of the resignation or removal of the Administrator
pursuant to Section 8(b) or (c), respectively, the Administrator shall cooperate
with the Issuer and take all reasonable steps requested to assist the Issuer in
making an orderly transfer of the duties of the Administrator.
10. Notices. Any notice, report or other communication given hereunder
shall be in writing and addressed as follows:
(a) if to the Issuer or the Owner Trustee, to:
NAL Auto Trust 1996-3
In care of Wilmington Trust Company
Rodney Square North
1100 Market Street
Wilmington, Delaware 19890
Attention: Corporate Trustee Department
(b) if to the Administrator, to:
NAL Acceptance Corporation
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, FL 33309
Attention: Dennis LaVigne
(c) if to the Indenture Trustee, to:
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust Administration -- Structured
Finance
or to such other address as any party shall have provided to the other parties
in writing. Any notice required to be in writing hereunder shall be deemed given
if such notice is mailed by certified mail, postage prepaid, or hand-delivered
to the address of such party as provided above.
11. Amendments. This Agreement may be amended from time to time by a
written amendment duly executed and delivered by the Issuer, the Administrator
and the Indenture Trustee, with the written consent of the Owner Trustee,
without the consent of the Noteholders and the Certificateholders, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the Noteholders or Certificateholders; provided that such amendment will not, in
the Opinion of Counsel satisfactory to the Indenture Trustee and each Rating
Agency,
10
<PAGE>
materially and adversely affect the interest of any Noteholder or
Certificateholder. This Agreement may also be amended by the Issuer, the
Administrator and the Indenture Trustee with the written consent of the Owner
Trustee and the holders of Notes evidencing at least a majority of the
Outstanding Amount of the Notes and the holders of Certificates evidencing at
least a majority of the Certificate Balance for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of Noteholders or the
Certificateholders; provided, however, that no such amendment may (i) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Receivables or distributions that are required to be
made for the benefit of the Noteholders or Certificateholders or (ii) reduce the
aforesaid percentage of the holders of Notes and Certificates which are required
to consent to any such amendment, without the consent of the holders of all the
outstanding Notes and Certificates. Notwithstanding the foregoing, the
Administrator may not amend this Agreement without the permission of the
Depositor, which permission shall not be unreasonably withheld.
12. Successors and Assigns. This Agreement may not be assigned by the
Administrator unless such assignment is previously consented to in writing by
the Issuer and the Owner Trustee and subject to the satisfaction of the Rating
Agency Condition in respect thereof. An assignment with such consent and
satisfaction, if accepted by the assignee, shall bind the assignee hereunder in
the same manner as the Administrator is bound hereunder. Notwithstanding the
foregoing, this Agreement may be assigned by the Administrator without the
consent of the Issuer or the Owner Trustee to a corporation or other
organization that is a successor (by merger, consolidation or purchase of
assets) to the Administrator; provided that such successor organization executes
and delivers to the Issuer, the Owner Trustee and the Indenture Trustee an
agreement in which such corporation or other organization agrees to be bound
hereunder by the terms of said assignment in the same manner as the
Administrator is bound hereunder. Subject to the foregoing, this Agreement shall
bind any successors or assigns of the parties hereto.
13. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
14. Headings. The section headings hereof have been inserted for
convenience of reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.
15. Counterparts. This Agreement may be executed in counterparts, each of
which when so executed shall be an
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<PAGE>
original, but all of which together shall constitute but one and the same
agreement.
16. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
17. Not Applicable to NAL Acceptance Corporation in Other Capacities.
Nothing in this Agreement shall affect any obligation NAL Acceptance Corporation
may have in any other capacity.
18. Limitation of Liability of Owner Trustee and Indenture Trustee. (a)
Notwithstanding anything contained herein to the contrary, this instrument has
been countersigned by Wilmington Trust Company in its individual capacity but
solely in its capacity as Owner Trustee of the Issuer and in no event shall
Wilmington Trust Company in its individual capacity or any beneficial owner of
the Issuer have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder, as to all of which
recourse shall be had solely to the assets of the Issuer. For all purposes of
this Agreement, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Articles VI, VII and VIII of the Trust
Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by Bankers Trust Company not in its individual
capacity but solely as Indenture Trustee and in no event shall Bankers Trust
Company have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
19. Third-Party Beneficiary. The Owner Trustee is a third-party
beneficiary to this Agreement and is entitled to the rights and benefits
hereunder and may enforce the provisions hereof as if it were a party hereto.
* * * * * * * * * * * * * * * * * * * * * *
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
NAL AUTO TRUST 1996-3
By: WILMINGTON TRUST COMPANY, not
in its individual capacity but
solely as Owner Trustee
By: ______________________________
Name: Emmett R. Harmon
Title: Vice President
BANKERS TRUST COMPANY,
not in its individual capacity
but solely as Indenture Trustee
By: ___________________________________
Name:
Title:
NAL ACCEPTANCE CORPORATION,
as Administrator
By: ___________________________________
Name: Dennis R. LaVigne
Title: Vice President and Treasurer
<PAGE>
EXHIBIT A
POWER OF ATTORNEY
STATE OF NEW YORK }
}
COUNTY OF NEW YORK }
KNOW ALL MEN BY THESE PRESENTS, that Wilmington Trust Company, a Delaware
banking corporation, not in its individual capacity but solely as owner trustee
(the "Owner Trustee") for NAL Auto Trust 1996-3 (the "Trust"), does hereby make,
constitute and appoint NAL Corporation, as administrator under the
Administration Agreement dated as of September 11, 1996 (the "Administration
Agreement"), among the Trust, NAL Acceptance Corporation and Bankers Trust
Company, as Indenture Trustee, as the same may be amended from time to time, and
its agents and attorneys, as Attorneys-in-Fact to execute on behalf of the Owner
Trustee or the Trust all such documents, reports, filings, instruments,
certificates and opinions as it should be the duty of the Owner Trustee or the
Trust to prepare, file or deliver pursuant to the Related Agreements, or
pursuant to Section 5.05(a), (b), (c) or (d) of the Trust Agreement, including,
without limitation, to appear for and represent the Owner Trustee and the Trust
in connection with the preparation, filing and audit of federal, state and local
tax returns pertaining to the Trust, and with full power to perform any and all
acts associated with such returns and audits that the Owner Trustee could
perform, including without limitation, the right to distribute and receive
confidential information, defend and assert positions in response to audits,
initiate and defend litigation, and to execute waivers of restrictions on
assessments of deficiencies, consents to the extension of any statutory or
regulatory time limit, and settlements.
All powers of attorney for this purpose heretofore filed or executed by
the Owner Trustee are hereby revoked.
Capitalized terms that are used and not otherwise defined herein shall
have the meanings ascribed thereto in the Administration Agreement.
EXECUTED this ___ day of September, 1996.
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
__________________________________
Name:
Title:
A-1
<PAGE>
STATE OF ___________}
}
COUNTY OF _________ }
Before me, the undersigned authority, on this day personally appeared
_______________________, known to me to be the person whose name is subscribed
to the foregoing instrument, and acknowledged to me that he/she signed the same
for the purposes and considerations therein expressed.
Sworn to before me this ___
day of _______, 199_.
________________________________________________________________________________
Notary Public - State of ____________
EXECUTION COPY
RECEIVABLES PURCHASE AGREEMENT dated as of September 11, 1996, among NAL
ACCEPTANCE CORPORATION, a Florida corporation ("NAL"), AUTORICS, INC., a
Delaware Corporation (the "Seller"), and AUTORICS II, INC., a Delaware
corporation (the "Purchaser").
WHEREAS in the regular course of its business, the Seller has purchased
certain motor vehicle retail installment sale contracts secured by new and used
automobiles, light-duty trucks and vans from NAL which, in turn purchased such
contracts from motor vehicle dealers and 3 others; and
WHEREAS the Purchaser wishes to purchase the Receivables (as hereinafter
defined) and to transfer the Receivables to NAL Auto Trust 1996-3 (the "Trust"),
which will issue the 7.30% Asset Backed Notes (the "Notes"), payment of which
will be secured by the Receivables, and the 8.50% Asset Backed Certificates
representing fractional undivided interests in the property of the Trust
including the Receivables, subject to the rights of the Indenture Trustee on
behalf of the Noteholders;
WHEREAS the Seller and Purchaser are wholly owned subsidiaries of NAL and
NAL wishes to facilitate the transfer of the Receivables and, to that end, has
agreed to make certain representations and warranties relating to the
Receivables and to pay certain expenses and amounts with respect hereto; and
WHEREAS NAL, the Seller and the Purchaser wish to set forth the terms
pursuant to which the Seller will sell the Receivables to the Purchaser;
NOW, THEREFORE, in consideration of the foregoing, other good and valuable
consideration and the mutual terms and covenants contained herein, the parties
hereto agree as follows:
ARTICLE I
Certain Definitions
Terms not defined in this Agreement shall have the meaning set forth in
the Sale and Servicing Agreement or the Indenture, as applicable. As used in
this Agreement, the following terms shall, unless the context otherwise
requires, have the following meanings (such meanings to be equally applicable to
the singular and plural forms of the terms defined):
"Agreement" shall mean this Receivables Purchase Agreement, as the same
may be amended and supplemented from time to time.
"Assignment" shall mean the document of assignment substantially in the
form of Exhibit A.
"Certificates" shall mean the Trust Certificates (as defined in the Trust
Agreement).
"Certificateholders" shall mean the holders of Certificates.
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"Closing Date" shall mean September 27, 1996.
"Collections" shall mean all amounts collected by the Servicer (from
whatever source) on or with respect to the Receivables.
"Cutoff Date" means September 11, 1996.
"Indenture" shall mean the Indenture dated as of September 11, 1996
between the Trust and Bankers Trust Company, as trustee (the "Indenture
Trustee"), as the same may be amended and supplemented from time to time.
"NAL" shall mean NAL Acceptance Corporation, a Florida corporation, its
successors and assigns.
"Noteholders" shall mean the holders of the Notes.
"Private Placement Memorandum" shall mean the Private Placement Memorandum
dated September 27, 1996, relating to the Notes and the Certificates.
"Purchaser" shall mean AUTORICS II, Inc., a Delaware corporation, its
successors and assigns.
"Receivable" shall mean any Contract listed on Schedule I hereto (which
Schedule may be in the form of microfiche).
"Repurchase Event" shall have the meaning specified in Section 6.02.
"Sale and Servicing Agreement" shall mean the Sale and Servicing Agreement
dated as of September 11, 1996, among the Trust, the Purchaser, Bankers Trust
Company, as Back-up Servicer, and the Seller, as the same may be amended and
supplemented from time to time.
"Schedule of Receivables" shall mean the list of Receivables annexed
hereto as Schedule I.
"Seller" shall mean Autorics, Inc., a Delaware corporation, its successors
and assigns.
"Trust Agreement" shall mean the Trust Agreement dated as of September 11,
1996, between the Purchaser and Wilmington Trust Company, as the owner trustee
(the "Owner Trustee"), as the same may be amended and supplemented from time to
time.
ARTICLE II
Conveyance of Receivables
SECTION 2.01. Conveyance of Receivables. In consideration of the
Purchaser's delivery to or upon the order of the Seller of $65,655,502.34, the
Seller does hereby sell, transfer, assign, set over and otherwise convey to the
Purchaser, without recourse (subject to the obligations of the Seller and NAL
herein), all right, title and interest of the Seller in and to (but none of the
obligations of the Seller with respect to):
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(a) the Receivables, and all moneys received thereon on and after the
Cutoff Date plus all Payaheads as of the Cutoff Date;
(b) the security interests in the Financed Vehicles granted by Obligors
pursuant to the Receivables, any other right to realize upon property securing a
Receivable and any other interest of the Seller in such Financed Vehicles
including the Seller's right, title and interest in the lien on the Financed
Vehicles in the name of Autorics, Inc. or the Seller's agents, NAL or SFI;
(c) any proceeds with respect to the Receivables from claims on any
Insurance Policies relating to the Financed Vehicles or Obligors;
(d) proceeds of any recourse (but none of the obligations) to Dealers on
Receivables;
(e) any Financed Vehicle that shall have secured a Receivable and shall
have been acquired by or on behalf of the Seller, the Purchaser, or, upon the
assignment contemplated by the Sale and Servicing Agreement, the Servicer or the
Trust;
(f) the Receivables Files;
(g) the obligations, duties and responsibilities of NAL to the Seller made
hereunder, including without limitation, the representations and warranties made
by NAL pursuant to Section 3.02(b) of this Agreement and the representations and
warranties on the Receivables made by NAL pursuant to Section 3.02(c) of this
Agreement and the right of the Seller to cause NAL to purchase the Receivables
under certain circumstances; and
(h) the proceeds of any and all of the foregoing.
SECTION 2.02. The Closing. The sale and purchase of the Receivables shall
take place at a closing (the "Closing") at the offices of Brown & Wood LLP, One
World Trade Center, New York, New York 10048 on the Closing Date, simultaneously
with the closings under (a) the Sale and Servicing Agreement and (b) the
Indenture.
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of the Purchaser. The
Purchaser hereby represents and warrants to the Seller as of the Closing Date:
(a) Organization and Good Standing. The Purchaser has been duly organized
and is validly existing as a corporation in good standing under the laws of the
State of Delaware, with the power and authority to own its properties and to
conduct its business as such properties are currently owned and such business is
presently conducted, and had at all relevant times, and has, the power,
authority and legal right to acquire and own the Receivables.
(b) Due Qualification. The Purchaser is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all
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jurisdictions in which the ownership or lease of its property or the conduct of
its business shall require such qualifications.
(c) Power and Authority. The Purchaser has the power and authority to
execute and deliver this Agreement and to carry out its terms, and the
execution, delivery and performance of this Agreement has been duly authorized
by the Purchaser by all necessary corporate action.
(d) No Violation. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time) a default under, the certificate of
incorporation or bylaws of the Purchaser, or any indenture, agreement or other
instrument to which the Purchaser is a party or by which it is bound; or result
in the creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement or other instrument (other than the
Sale and Servicing Agreement, the Indenture and the Trust Agreement); or violate
any law or, to the best of the Purchaser's knowledge, any order, rule or
regulation applicable to the Purchaser of any court or of any federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Purchaser or its properties.
(e) No Proceedings. There are no proceedings or investigations pending or,
to the Purchaser's best knowledge, threatened, before any court, regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Purchaser or its properties: (i) asserting the invalidity
of this Agreement, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or (iii) seeking any determination
or ruling that might materially and adversely affect the performance by the
Purchaser of its obligations under, or the validity or enforceability of, this
Agreement.
SECTION 3.02. Representations and Warranties of the Seller and NAL. (a)
The Seller hereby represents and warrants to the Purchaser as of the Closing
Date:
(i) Organization and Good Standing. The Seller has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware, with the power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is presently conducted, and had at all relevant
times, and has, the power, authority and legal right to acquire and own
the Receivables.
(ii) Due Qualification. The Seller is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of its property or the conduct of its business shall require such
qualifications.
(iii) Power and Authority. The Seller has the power and authority to
execute and deliver this Agreement and to carry out its terms; the Seller
has full power and authority to sell and assign the property sold and
assigned to the Purchaser hereby and has duly authorized such sale and
assignment to the Purchaser by all necessary corporate action; and the
execution, delivery and performance of this Agreement has been duly
authorized by the Seller by all necessary corporate action.
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(iv) No Violation. The consummation of the transactions contemplated
by this Agreement and the fulfillment of the terms hereof shall not
conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time) a default under,
the articles of incorporation or bylaws of the Seller, or any indenture,
agreement or other instrument to which the Seller is a party or by which
it is bound; or result in the creation or imposition of any Lien upon any
of its properties pursuant to the terms of any such indenture, agreement
or other instrument (other than this Agreement); or violate any law or, to
the best of the Seller's knowledge, any order, rule or regulation
applicable to the Seller of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or its properties.
(v) No Proceedings. There are no proceedings or investigations
pending or, to the Seller's best knowledge, threatened before any court,
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or its properties: (A)
asserting the invalidity of this Agreement, (B) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement or
(C) seeking any determination or ruling that might materially and
adversely affect the performance by the Seller of its obligations under or
the validity or enforceability of, this Agreement.
(vi) Principal Place of Business. The principal place of business
and chief executive office of the Seller are located at the place set
forth in Section 6.08(a) and such location has not changed since the date
the Seller was incorporated.
(vii) Use of Names. The legal name of the Seller is the name used by
it in this Agreement and the Seller has not changed its name since the
date of its incorporation and does not have trade names, fictitious names,
assumed names or "doing business" names.
(viii) Solvency. The Seller is solvent and will not become insolvent
after giving effect to the transactions contemplated in this Agreement;
the Seller is paying its debts, if any, as they become due; the Seller,
after giving effect to the transactions contemplated in this Agreement,
will have adequate capital to conduct its business.
(b) NAL hereby represents and warrants to the Seller as of the Closing
Date:
(i) Organization and Good Standing. NAL has been duly organized and
is validly existing as a corporation in good standing under the laws of
the State of Florida, with the power and authority to own its properties
and to conduct its business as such properties are currently owned and
such business is presently conducted, and had at all relevant times, and
has, the power, authority and legal right to acquire and own the
Receivables.
(ii) Due Qualification. NAL is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of its property or the conduct of its business shall require such
qualifications.
(iii) Power and Authority. NAL has the power and authority to
execute and deliver this Agreement and to carry out its terms; NAL has
full power and authority to
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perform its obligations under this Agreement; and the execution, delivery
and performance of this Agreement has been duly authorized by NAL by all
necessary corporate action.
(iv) No Violation. The consummation of the transactions contemplated
by this Agreement and the fulfillment of the terms hereof shall not
conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time) a default under,
the articles of incorporation or bylaws of NAL, or any indenture,
agreement or other instrument to which NAL is a party or by which it is
bound; or result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement or other
instrument (other than this Agreement); or violate any law or, to the best
of NAL's knowledge, any order, rule or regulation applicable to NAL of any
court or of any federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over NAL or its
properties.
(v) No Proceedings. There are no proceedings or investigations
pending or, to NAL's best knowledge, threatened before any court,
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over NAL or its properties: (A)
asserting the invalidity of this Agreement, (B) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement or
(C) seeking any determination or ruling that might materially and
adversely affect the performance by NAL of its obligations under or the
validity or enforceability of, this Agreement.
NAL agrees that such representations and warranties shall be conveyed
hereunder by the Seller to the Purchaser, by the Purchaser to the Issuer under
the Sale and Servicing Agreement, and pledged by the Issuer to the Indenture
Trustee. NAL further agrees that any such Person to whom such rights are
conveyed may enforce any and all remedies for the breach thereof directly
against NAL. NAL agrees that the Purchaser shall rely on such representations
and warranties in accepting the Receivables.
(c) NAL makes the following representations and warranties to the Seller
in respect of the Receivables. NAL agrees that such representations and
warranties shall be conveyed hereunder by the Seller to the Purchaser, by the
Purchaser to the Issuer under the Sale and Servicing Agreement, and pledged by
the Issuer to the Indenture Trustee. NAL further agrees that any such Person to
whom such rights are conveyed may enforce any and all remedies for the breach
thereof directly against NAL. NAL agrees that the Purchaser shall rely on such
representations and warranties in accepting the Receivables. Such
representations and warranties speak as of the execution and delivery of this
Agreement, but shall survive the sale, transfer and assignment of the
Receivables to the Purchaser and the subsequent sale, assignment and transfer of
the Receivables pursuant to the Sale and Servicing Agreement and the Grant
thereof pursuant to the Indenture:
(i) Characteristics of Receivables. Each Receivable (A) was
originated in the United States of America by a Dealer for the retail sale
of a Financed Vehicle in the ordinary course of such Dealer's business,
was fully and properly executed by the parties thereto, was purchased by
NAL from such Dealer under an existing dealer agreement, and was validly
assigned by such Dealer to NAL in accordance with the terms of such dealer
agreement and from NAL to the Seller pursuant to the Contract Purchase
Agreement dated September 5, 1995 between NAL and the Seller, (B) has
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created a valid, subsisting and enforceable first priority security
interest in favor of the Seller in the Financed Vehicle, which security
interest is assignable by the Seller to the Purchaser, by the Purchaser to
the Trust and by the Trust to the Indenture Trustee, (C) contains
customary and enforceable provisions such that the rights and remedies of
the holder thereof are adequate for realization against the collateral of
the benefits of the security, (D) provides for level monthly payments
(provided that the payment in the first or last month in the life of the
Receivable may be different from the level payments) that fully amortize
the Amount Financed by maturity and yield interest at the Annual
Percentage Rate, and (E) provides, in the event that such Contract is
prepaid, for a prepayment that fully pays the Principal Balance of the
Receivable and includes a full month's interest in the month of prepayment
at the Annual Percentage Rate.
(ii) Schedule of Receivables. The information set forth in Schedule
I to this Agreement is true and correct in all material respects as of the
opening of business on the Cutoff Date, and no selection procedures
believed to be adverse to the Noteholders or the Certificateholders were
utilized in selecting the Receivables. The computer tape regarding the
Receivables made available to the Purchaser and its assigns is true and
correct in all respects.
(iii) Compliance with Law. Each Receivable and the sale of the
related Financed Vehicle complied at the time it was originated or made,
and at the execution of this Agreement complies, in all material respects
with all requirements of applicable federal, state and local laws and
regulations thereunder, including usury laws, the Federal Truth-in-Lending
Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the
Fair Debt Collection Practices Act, the Federal Trade Commission Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and
S and state adaptations of the National Consumer Act and of the Uniform
Consumer Credit Code, and other consumer credit laws and equal credit
opportunity and disclosure laws.
(iv) Binding Obligation. Each Receivable represents the genuine,
legal, valid and binding payment obligation in writing of the Obligor,
enforceable by the holder thereof in accordance with its terms.
(v) No Government Obligor. None of the Receivables is due from the
United States of America or any state or from any agency, department or
instrumentality of the United States of America or any state.
(vi) Security Interest in Financed Vehicle. Immediately prior to the
sale, assignment and transfer thereof, each Receivable shall be secured by
a validly perfected first security interest in the Financed Vehicle in
favor of the Seller as secured party or all necessary and appropriate
actions have been commenced that would result in the perfection of a first
security interest in the Financed Vehicle in favor of the Seller as
secured party.
(vii) Receivables in Force. No Receivable has been satisfied,
subordinated or rescinded, nor has any Financed Vehicle been released from
the lien granted by the related Receivable in whole or in part.
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(viii) No Waiver. No provision of a Receivable has been waived
except by a writing constituting an amendment to the applicable Contract.
(ix) No Amendments. No Receivable has been amended such that the
amount of the Obligor's scheduled payments has been increased.
(x) No Defenses. No right of rescission, setoff, counterclaim or
defense has been asserted or threatened with respect to any Receivable.
(xi) No Liens. To the best of the Seller's knowledge, no liens or
claims have been filed for work, labor or materials relating to a Financed
Vehicle that are liens prior to, or equal or coordinate with, the security
interest in the Financed Vehicle created by any Receivable.
(xii) No Default. No Receivable has a payment that is more than 30
days overdue as of the Cutoff Date and no default, breach, violation or
event permitting acceleration under the terms of any Receivable has
occurred; no continuing condition that with notice or the lapse of time
would constitute a default, breach, violation or event permitting
acceleration under the terms of any Receivable has arisen; and the Seller
has not waived any of its rights regarding the occurrence of any of the
foregoing.
(xiii) Insurance. The Seller, in accordance with its customary
procedures, has determined that each Obligor has obtained physical damage
insurance covering the Financed Vehicle and under the terms of the
Receivable the Obligor is required to maintain such insurance.
(xiv) Title. It is the intention of the parties hereto that the
transfer and assignment herein contemplated constitute a sale of the
Receivables from the Seller to the Purchaser, and that the beneficial
interest in and title to the Receivables not be part of the debtor's
estate in the event of the filing of a bankruptcy petition by or against
the Seller under any bankruptcy law. Immediately prior to the transfer and
assignment herein contemplated, the Seller had good and marketable title
to each Receivable free and clear of all Liens and, immediately upon the
transfer thereof, the Purchaser shall have good and marketable title to
each Receivable, free and clear of all Liens; and the transfer has been
perfected under the UCC.
(xv) Lawful Assignment. No Receivable was originated in, or is
subject to the laws of, any jurisdiction under which the sale, transfer
and assignment of such Receivable or any Receivable under this Agreement,
the Sale and Servicing Agreement or the Indenture is unlawful, void or
voidable.
(xvi) All Filings Made. All filings (including UCC filings)
necessary in any jurisdiction to give the Purchaser a first perfected
ownership interest in the Receivables have been made.
(xvii) One Original. There is only one executed original of each
Receivable.
(xviii) Maturity of Receivables. Each Receivable has an original
maturity of not more than 60 months; the weighted average remaining term
of the Receivables is 52.42 months as of the Cutoff Date.
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(xix) Scheduled Payments. (A) Each Receivable has a first Scheduled
Payment due, in the case of Precomputed Receivables, or a scheduled due
date, in the case of Simple Interest Receivables, on or prior to October
12, 1996 and (B) no Receivable has a final scheduled payment date later
than the Final Scheduled Maturity Date.
(xx) Location of Receivable Files. The Receivable Files are kept at
one or more of the locations listed in Schedule II hereto.
(xxi) Outstanding Principal Balance. The Amount Financed pursuant to
each Receivable is at least $1,000.
(xxii) Financing. Approximately 67.60% of the aggregate principal
balance of the Receivables, constituting 72.75% of the number of
Receivables as of the Cutoff Date, represent financing of used vehicles;
the remainder of the Receivables represent financing of new vehicles;
approximately 93.36% of the aggregate principal balance of the Receivables
as of the Cut-off Date represent Precomputed Receivables; and the
remainder of the Receivables represent Simple Interest Receivables. The
aggregate Principal Balance of the Receivables as of the Cutoff Date is
$70,052,483.84.
(xxiii) No Bankruptcies. As of the Cutoff Date, no Obligor on any
Receivable was noted in the related Receivable File as having filed for
bankruptcy.
(xxiv) No Repossessions. No Financed Vehicle securing any Receivable
is in repossession status.
(xxv) Chattel Paper. Each Receivable constitutes "chattel paper" as
defined in the UCC.
(xxvi) Underwriting Guidelines. Each Receivable was originated by
the Dealer and purchased by NAL in accordance with the underwriting
guidelines described in the Private Placement Memorandum.
(xxvii) Servicing. As of the Cutoff Date each Receivable was being
serviced by the Servicer and no other person had a right to service such
Receivable.
(xxviii) Full Amount Advanced. The full principal amount of each
Receivable has been advanced to each Obligor, and there is no requirement
for future advances thereunder. The Obligor with respect to the Receivable
does not have any option under the Receivables to borrow from any person
additional funds secured by the Financed Vehicle.
(xxix) Obligation to Dealers or Others. The Purchaser and its
assignees will assume no obligations to Dealers or other originators of
prior holders of the Receivables (including, but not limited to
obligations under dealer reserves) as a result of its purchase of the
Receivables.
(xxx) Collection Practices. The Collection practices utilized by
any person servicing a Receivable in seeking payment under the
documentation evidencing such Receivable have been in all respects legal,
proper and customary in the automobile loan servicing business.
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(xxxi) First Payment. The first payment on each Receivable with
respect to which the first payment was not yet due as of the Cutoff Date
will be made in full no later than the 45th day after its due date.
(xxxii) Private Placement Memorandum. The Private Placement
Memorandum does not contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein
not misleading.
(xxxiii) Subsequent Transfer. The representations and warranties of
the Depositor in Section 3.01 of the Sale and Servicing Agreement are true
and correct.
ARTICLE IV
Conditions
SECTION 4.01. Conditions to Obligation of the Purchaser. The obligation of
the Purchaser to purchase the Receivables is subject to the satisfaction of the
following conditions:
(a) Representations and Warranties True. The representations and
warranties of the Seller and NAL hereunder shall be true and correct on the
Closing Date with the same effect as if then made, and each of the Seller and
NAL shall have performed all obligations to be performed by it hereunder on or
prior to the Closing Date.
(b) Computer Files Marked. The Seller shall, at its own expense, on or
prior to the Closing Date indicate in its computer files that the Receivables
have been sold to the Purchaser pursuant to this Agreement, and deliver to the
Purchaser the Schedule of Receivables certified by the Chairman, the President,
a Vice President or the Treasurer to be true, correct and complete.
(c) Documents To Be Delivered by the Seller at the Closing.
(i) The Assignment. At the Closing, the Seller will execute and
deliver an Assignment substantially in the form of Exhibit A hereto.
(ii) Evidence of UCC Filing. On or prior to the Closing Date, the
Seller shall record and file, at its own expense, a UCC-1 financing
statement in each jurisdiction in which required by applicable law,
executed by the Seller, as seller or debtor, and naming the Purchaser as
purchaser or secured party, describing the Receivables and the other
property included in the Owner Trust Estate, meeting the requirements of
the laws of each such jurisdiction and in such manner as is necessary to
perfect the sale, transfer, assignment and conveyance of such Receivables
to the Purchaser. The Seller shall deliver a file-stamped copy or other
evidence satisfactory to the Purchaser of such filing to the Purchaser on
or prior to the Closing Date.
(iii) Other Documents. Such other documents as the Purchaser may
reasonably request.
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(d) Other Transactions. The transactions contemplated by the Sale and
Servicing Agreement, the Indenture and the Trust Agreement to be consummated on
the Closing Date shall be consummated on such date.
SECTION 4.02. Conditions to Obligation of the Seller. The obligation of
the Seller to sell the Receivables to the Purchaser is subject to the
satisfaction of the following conditions:
(a) Representations and Warranties True. The representations and
warranties of the Purchaser hereunder shall be true and correct on the Closing
Date with the same effect as if then made, and the Seller shall have performed
all obligations to be performed by it hereunder on or prior to the Closing Date.
(b) Receivables Purchase Price. On the Closing Date, the Purchaser shall
have delivered to the Seller the purchase price specified in Section 2.01.
ARTICLE V
Covenants of the Seller and NAL
The Seller and NAL agree with the Purchaser as follows:
SECTION 5.01. Protection of Right, Title and Interest. (a) Filings. NAL
and the Seller shall cause all financing statements and continuation statements
and any other necessary documents covering the right, title and interest of the
Seller and the Purchaser, respectively, in and to the Receivables and the other
property included in the Owner Trust Estate to be promptly filed and at all
times to be kept recorded, registered and filed, all in such manner and in such
places as may be required by law fully to preserve and protect the right, title
and interest of the Purchaser hereunder in and to the Receivables and the other
property included in the Owner Trust Estate. NAL and the Seller shall deliver to
the Purchaser file stamped copies of, or filing receipts for, any document
recorded, registered or filed as provided above, as soon as available following
such recordation, registration or filing. The Purchaser shall cooperate fully
with NAL and the Seller (and the Seller will cooperate with NAL) in connection
with the obligations set forth above and will execute any and all documents
reasonably required to fulfill the intent of this paragraph.
(b) Name Change. Within 15 days after the Seller makes any change in its
name, identity or corporate structure that would make any financing statement or
continuation statement filed in accordance with paragraph (a) above seriously
misleading within the applicable provisions of the UCC or any title statute, the
Seller shall give the Purchaser notice of any such change and, no later than 5
days after the effective date thereof, shall file such financing statements or
amendments as may be necessary to continue the perfection of the Purchaser's
interest in the property included in the Owner Trust Estate.
(c) Resolution. The Seller shall have an obligation to give the Purchaser
at least 60 days' prior written notice of any relocation of its principal
executive office if, as a result of such relocation, the applicable provisions
of the UCC would require the filing of any amendment of any previously filed
financing or continuation statement or of any new financing statement and shall
promptly file any such amendment or new financing statement. The
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Servicer shall at all times maintain each office from which it shall service
Receivables, and its principal executive office, within the United States of
America.
(d) Notice. If at any time the Seller shall propose to sell, grant a
security interest in, or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the Seller
shall give to such prospective purchaser, lender or other transferee computer
tapes, records or printouts (including any restored from backup archives) that,
if they shall refer in any manner whatsoever to any Receivable, shall indicate
clearly that such Receivable has been sold and is owned by the Purchaser. Should
any third party inquire of the Seller as to the Receivables, the Seller will
promptly indicate to such party that the Receivables have been sold to the
Purchaser pursuant to this Agreement.
SECTION 5.02. Other Liens or Interests. Except for the conveyances
hereunder and under the Sale and Servicing Agreement, the Indenture, the Trust
Agreement and the other Basic Documents, the Seller will not sell, pledge,
assign or transfer to any Person, or grant, create, incur, assume or suffer to
exist any Lien on, or any interest in, to or under the Receivables, and the
Seller shall defend the right, title and interest of the Purchaser in, to and
under the Receivables against all claims of third parties claiming through or
under the Seller; provided, however, that the Seller's obligations under this
Section shall terminate upon the termination of the Trust pursuant to the Trust
Agreement.
SECTION 5.03. Costs and Expenses. NAL agrees to pay all reasonable costs
and disbursements in connection with the perfection, as against all third
parties, of the Seller's or any of its assignees right, title and interest in
and to the Receivables.
SECTION 5.04. Indemnification. NAL shall indemnify the Purchaser for any
liability resulting from the failure of a Receivable to be originated in
compliance with all requirements of law and for any breach of any of its or the
Seller's representations and warranties contained herein and for any failure by
the Seller to comply with its obligations under Sections 5.01 and 5.02 hereof.
These indemnity obligations shall be in addition to any obligation that NAL or
the Seller may otherwise have.
ARTICLE VI
Miscellaneous Provisions
SECTION 6.01. Obligations of Seller and NAL. The obligations of the Seller
and NAL under this Agreement shall not be affected by reason of any invalidity,
illegality or irregularity of any Receivable.
SECTION 6.02. Repurchase Events. NAL hereby covenants and agrees with the
Seller for the benefit of the Seller and its assignees or their respective
assignees the occurrence of a breach of any of NAL's representations and
warranties contained in Section 3.02(c), unless any such breach shall have been
cured by the last day of the Collection Period following the discovery thereof
by NAL, or receipt by NAL of written notice from the Owner Trustee, the
Indenture Trustee, the Depositor, the Servicer, or the Back-up Servicer, shall
constitute an event obligating NAL to purchase as of such last day any
Receivable hereunder with respect to which such breach occurred if such breach
has had a material and adverse effect on the interests of the Purchaser or the
Trust in and to such Receivable (each, a "Repurchase Event"), at the Purchase
Amount from the Purchaser or, upon the assignment
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<PAGE>
contemplated by the Sale and Servicing Agreement, from the Trust. The repurchase
obligation of NAL shall constitute the sole remedy (other than that provided by
Section 5.04) of the Purchaser, the Trust, the Indenture Trustee, the
Noteholders, the Owner Trustee or the Certificateholders against NAL with
respect to any Repurchase Event.
SECTION 6.03. Purchaser Assignment of Repurchased Receivables. With
respect to all Receivables purchased by NAL pursuant to this Agreement, the
Purchaser shall assign, without recourse, representation or warranty, to NAL all
the Purchaser's right, title and interest in and to such Receivables and all
security and documents relating thereto.
SECTION 6.04. The Trust. The Seller and NAL acknowledge and agree that (a)
the Purchaser will, pursuant to the Sale and Servicing Agreement, sell the
Receivables to the Trust and assign its rights under this Agreement to the
Trust, (b) the Trust will, pursuant to the Indenture, Grant the Receivables and
its rights under this Agreement and the Sale and Servicing Agreement to the
Indenture Trustee on behalf of the Noteholders and (c) the representations and
warranties contained in this Agreement and the rights of the Purchaser under
this Agreement, including under Section 6.02 are intended to benefit the Trust,
the Certificateholders and the Noteholders. The Seller and NAL hereby consent to
all such sales and assignments and agree that the Owner Trustee or, if pursuant
to the Indenture, the Indenture Trustee may exercise the rights of the Purchaser
and enforce the obligations of the Seller and NAL hereunder directly and without
the consent of the Purchaser.
SECTION 6.05. Amendment. This Agreement may be amended from time to time,
with prior written notice to each Rating Agency, by a written amendment duly
executed and delivered by NAL, the Seller and the Purchaser, to cure any
ambiguity, to correct or supplement any provision herein which may be
inconsistent with any other provision herein, or to add any other provision with
respect to matters or questions arising under this Agreement which shall not be
inconsistent with the provisions of this Agreement or the Sale and Servicing
Agreement, the Trust Agreement or the Indenture; provided that such amendment
shall not, in the Opinion of Counsel satisfactory to the Owner Trustee and the
Indenture Trustee, materially and adversely affect the interest of any
Noteholder or Certificateholder in the Trust or the Receivables. This Agreement
may also be amended by NAL, the Seller and the Purchaser, with prior written
notice to each Rating Agency, with the consent of the holders of Notes
evidencing at least a majority of the Outstanding Amount of the Notes and the
holders of Certificates evidencing at least a majority of the Certificate
Balance for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Noteholders or the Certificateholders in the Trust or
Receivables; provided, however, that no such amendment may (i) increase or
reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Receivables or distributions that are required to be
made for the benefit of Noteholders or Certificateholders or (ii) reduce the
aforesaid percentage of the Notes and Certificates that is required to consent
to any such amendment, without the consent of the holders of all the outstanding
Notes and Certificates.
SECTION 6.06. Accountants' Letters. (a) Price Waterhouse LLP will review
the characteristics of the Receivables and will compare those characteristics to
the information with respect to the Receivables contained in the Private
Placement Memorandum; (b) the Seller will cooperate with the Purchaser and Price
Waterhouse LLP in making available all information and taking all steps
reasonably necessary to permit such accountants to complete the review set forth
in clause (a) above and to deliver the letters required of them under the
Private Placement Memorandum; (c) Price Waterhouse LLP will deliver to the
Purchaser a letter, dated
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<PAGE>
the date of the Private Placement Memorandum, in the form previously agreed to
by the Seller and the Purchaser, with respect to the financial and statistical
information contained in the Private Placement Memorandum and with respect to
such other information as may be agreed in the form of letter.
SECTION 6.07. Waivers. No failure or delay on the part of the Purchaser,
or any assignee of the Purchaser, in exercising any power, right or remedy under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or remedy preclude any other or
further exercise thereof or the exercise of any other power, right or remedy.
SECTION 6.08. Notices. All demands, notices and communications under this
Agreement shall be in writing, personally delivered or mailed by certified mail,
return receipt requested, or recognized overnight courier or by facsimile
confirmed by delivery or mail as described above, and shall be deemed to have
been duly given upon receipt (a) in the case of the Seller, to AUTORICS, 500
Cypress Creek Road West, Suite 590, Fort Lauderdale, Florida 33309, Telephone:
954-958-3590: Fax: 954-938-8209, Attention: Dennis LaVigne; (b) in the case of
the Purchaser, to AUTORICS II, Inc., 500 Cypress Creek Road West, Suite 590,
Fort Lauderdale, Florida 33309, Telephone: 954-958-3591; Fax: 954-938-8209,
Attention: Dennis LaVigne; (c) in the case of NAL, to NAL ACCEPTANCE
CORPORATION, 500 Cypress Creek Road West, Suite 590, Fort Lauderdale, Florida
33309, Telephone: 305-938-8200; Fax: 305-938-8209, Attention: Dennis LaVigne;
and (d) in the case of each Rating Agency, to Duff & Phelps Credit Rating Co.,
55 East Monroe Street, Chicago, Ill. 60603; Tel: 312-263-2610; Fax:
312-263-2852; Attn: Asset-Backed Research and Monitoring and to Fitch Investors
Service, L.P., One State Street Plaza, 32nd Floor, New York, N.Y. 10004 Tel:
(212) 908-0637; Fax: (212) 480-4438; Attn: Michael N. Babick; or as to each of
the foregoing, at such other address as shall be designated by written notice to
the other parties.
SECTION 6.09. Costs and Expenses. The Seller shall pay all expenses
incident to the performance of its obligations under this Agreement and NAL
agrees to pay all reasonable out-of-pocket costs and expenses of the Purchaser,
excluding fees and expenses of counsel, in connection with the perfection as
against third parties of the Purchaser's right, title and interest in and to the
Receivables and the enforcement of any obligation of the Seller hereunder.
SECTION 6.10. Representations of the Seller and the Purchaser. The
respective agreements, representations, warranties and other statements by NAL,
the Seller and the Purchaser set forth in or made pursuant to this Agreement
shall remain in full force and effect and will survive the sales and assignments
referred to in Section 6.04.
SECTION 6.11. Confidential Information. The Purchaser agrees that it will
neither use nor disclose to any Person the names and addresses of the Obligors,
except in connection with the enforcement of the Purchaser's rights hereunder,
under the Receivables, under the Sale and Servicing Agreement, the Indenture,
the Trust Agreement or any other Basic Document or as required by any of the
foregoing or by law.
SECTION 6.12. Headings and Cross-References. The various headings in this
Agreement are included for convenience only and shall not affect the meaning or
interpretation of any provision of this Agreement. References in this Agreement
to Section names or numbers are to such Sections of this Agreement.
14
<PAGE>
SECTION 6.13. GOVERNING LAW. THIS AGREEMENT AND THE ASSIGNMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER OR THEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION 6.14. Counterparts. This Agreement may be executed in two or more
counterparts and by different parties on separate counterparts, each of which
shall be an original, but all of which together shall constitute one and the
same instrument.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers duly authorized as of the date and year
first above written.
AUTORICS, INC.,
by ____________________________________
Name: Dennis R. LaVigne
Title: Vice President and Treasurer
NAL ACCEPTANCE CORPORATION,
by ____________________________________
Name: Dennis R. LaVigne
Title: Vice President and Treasurer
AUTORICS II, INC.,
by ____________________________________
Name: Dennis R. LaVigne
Title: Vice President and Treasurer
16
<PAGE>
ASSIGNMENT
For value received, in accordance with the Receivables Purchase Agreement
dated as of September 11, 1996, among AUTORICS, INC. (the "Seller"), NAL
ACCEPTANCE CORPORATION and AUTORICS II, INC. (the "Purchaser"), the Seller does
hereby sell, assign, transfer and otherwise convey unto the Purchaser, without
recourse (subject to the obligations of the Seller and NAL in the Receivables
Purchase Agreement), all right, title and interest of the Seller in and to (but
none of the obligations of the Seller with respect to) (i) the Receivables, and
all moneys received thereon on and after the Cutoff Date plus all Payaheads as
of the Cutoff Date; (ii) the security interests in the Financed Vehicles granted
by Obligors pursuant to the Receivables, any other right to realize upon
property securing a Receivable and any other interest of the Seller in such
Financed Vehicles including the Seller's right, title and interest in the lien
on the Financed Vehicles in the name of Autorics, Inc. or the Seller's agents,
NAL or SFI; (iii) any proceeds with respect to the Receivables from claims on
any Insurance Policies relating to the Financed Vehicles or Obligors; (iv)
proceeds of any recourse (but none of the obligations) to Dealers on
Receivables; (v) any Financed Vehicle that shall have secured a Receivable and
shall have been acquired by or on behalf of the Purchaser, or, upon the
assignment contemplated by the Sale and Servicing Agreement, the Servicer or the
Trust; (vi) the Receivables Files; (vii) the obligations, duties and
responsibilities of NAL to the Seller made under the Receivables Purchase
Agreement, including without limitation, the representations and warranties on
the Receivables made by NAL pursuant to Section 3.02(b) of the Receivables
Purchase Agreement and the representations and warranties on the Receivables
made by NAL pursuant to Section 3.02(c) of the Receivables Purchase Agreement
and the right of the Seller to cause NAL to purchase the Receivables under
certain circumstances; and (viii) the proceeds of any and all of the foregoing.
The foregoing sale does not constitute and is not intended to result in any
assumption by the Purchaser of any obligation of the undersigned to the
Obligors, insurers, Dealers or any other person in connection with the
Receivables, Receivable Files, any insurance policies or any agreement or
instrument relating to any of them.
This Assignment is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the
Receivables Purchase Agreement.
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to them in the Receivables Purchase Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly
executed as of September 11, 1996.
AUTORICS, INC.
by ________________________
Name:
Title:
<PAGE>
SCHEDULE I
Schedule of Receivables
[To Be Delivered at Closing]
I-1
<PAGE>
SCHEDULE II
Location of Receivable Files
Bankers Trust Company
Four Albany Street
New York, NY 10006
II-1
EXECUTION COPY
================================================================================
SALE AND SERVICING AGREEMENT
among
NAL AUTO TRUST 1996-3,
Issuer,
and
AUTORICS II, INC.,
Depositor,
and
NAL ACCEPTANCE CORPORATION,
Servicer
and
BANKERS TRUST COMPANY,
Backup Servicer
Dated as of September 11, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
SECTION 1.01. Definitions........................................... 1
SECTION 1.02. Other Definitional Provisions......................... 16
ARTICLE II
Conveyance of Receivables
SECTION 2.01. Conveyance of Receivables............................. 17
ARTICLE III
The Receivables
SECTION 3.01. Representations and Warranties of
the Depositor with Respect to the
Receivables........................................... 18
SECTION 3.02. Repurchase upon Breach................................ 18
SECTION 3.03. Custody of Receivable Files........................... 19
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.01. Duties of Servicer.................................... 20
SECTION 4.02. Collection and Allocation of Receivable
Payments.............................................. 21
SECTION 4.03. Realization upon Receivables.......................... 21
SECTION 4.04. Insurance............................................. 22
SECTION 4.05. Maintenance of Security Interests in
Financed Vehicles..................................... 22
SECTION 4.06. Covenants of Servicer................................. 22
SECTION 4.07. Purchase of Receivables upon Breach................... 23
SECTION 4.08. Servicing Fee......................................... 23
SECTION 4.09. Servicer's Certificate................................ 23
SECTION 4.10. Annual Statement as to Compliance;
Notice of Default..................................... 24
SECTION 4.11. Annual Independent Certified Public
Accountants' Report................................... 24
SECTION 4.12. Servicer Expenses..................................... 25
SECTION 4.13. Appointment of Subservicer............................ 25
SECTION 4.14. Oversight of Servicing................................ 25
SECTION 4.15. Duties of Backup Servicer............................. 26
i
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ARTICLE V
Trust Accounts; Distributions; Reserve Account;
Statements to Certificateholders and Noteholders
SECTION 5.01. Establishment of Trust Accounts....................... 27
SECTION 5.02. Collections........................................... 30
SECTION 5.03. Application of Collections............................ 30
SECTION 5.04. Additional Deposits................................... 30
SECTION 5.05. Distributions......................................... 30
SECTION 5.06. Reserve Account....................................... 31
SECTION 5.07. Statements to Certificateholders and
Noteholders........................................... 33
SECTION 5.08. Transfer of the Notes................................. 35
SECTION 5.09. Dealer Reserve Account................................ 35
ARTICLE VI
The Depositor
SECTION 6.01. Representations of Depositor.......................... 35
SECTION 6.02. Corporate Existence................................... 37
SECTION 6.03. Liability of Depositor; Indemnities................... 38
SECTION 6.04. Merger or Consolidation of, or
Assumption of the Obligations of, Depositor........... 38
SECTION 6.05. Limitation on Liability of Depositor and
Others................................................ 39
SECTION 6.06. Depositor May Own Certificates or Notes............... 39
SECTION 6.07. Sale of Receivables................................... 40
ARTICLE VII
The Servicer; Backup Servicer
SECTION 7.01. Representations of Servicer........................... 40
SECTION 7.02. Indemnities of Servicer............................... 41
SECTION 7.03. Merger or Consolidation of, or
Assumption of the Obligations of, Servicer......... 43
SECTION 7.04. Limitation on Liability of Servicer and
Others............................................. 43
SECTION 7.05. NAL Not To Resign as Servicer......................... 44
SECTION 7.06. Representations of Backup Servicer.................... 44
SECTION 7.07. Merger or Consolidation of, or
Assumption of the Obligations of, Backup
Servicer........................................... 45
SECTION 7.08. Resignation as Backup Servicer........................ 45
ARTICLE VIII
Default
SECTION 8.01. Servicer Default...................................... 46
SECTION 8.02. Appointment of Successor.............................. 47
SECTION 8.03. Notification to Noteholders and
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Certificateholders.................................... 49
SECTION 8.04. Waiver of Past Defaults............................... 49
ARTICLE IX
Termination
SECTION 9.01. Optional Purchase of All Receivables.................. 49
ARTICLE X
Miscellaneous
SECTION 10.01. Amendment............................................ 51
SECTION 10.02. Protection of Title to Trust......................... 52
SECTION 10.03. Notices.............................................. 54
SECTION 10.04. Assignment by the Depositor or the
Servicer............................................. 55
SECTION 10.05. Limitations on Rights of Others...................... 55
SECTION 10.06. Severability......................................... 55
SECTION 10.07. Separate Counterparts................................ 55
SECTION 10.08. Headings............................................. 55
SECTION 10.09. Governing Law........................................ 55
SECTION 10.10. Assignment by Issuer................................. 55
SECTION 10.11. Nonpetition Covenants................................ 56
SECTION 10.12. Limitation of Liability of Owner
Trustee and Indenture Trustee........................ 56
SCHEDULE A Schedule of Receivables
EXHIBIT A Form of Distribution Date Statement to Noteholders
EXHIBIT B Form of Distribution Date Statement to
Certificateholders
EXHIBIT C Form of Servicer's Certificate
EXHIBIT D Form of Receivables Checklist
EXHIBIT E Form of Receivables Assignment
iii
<PAGE>
SALE AND SERVICING AGREEMENT dated as of September 11, 1996, among NAL AUTO
TRUST 1996-3, a Delaware business trust (the "Issuer"), AUTORICS II, INC.,
a Delaware corporation (the "Depositor"), NAL ACCEPTANCE CORPORATION, a
Florida corporation (the "Servicer") and BANKERS TRUST COMPANY, a New York
banking corporation (the "Backup Servicer").
WHEREAS the Issuer desires to purchase a portfolio of receivables arising
in connection with automobile retail installment sale contracts generated by NAL
Acceptance Corporation in the ordinary course of business which were sold by NAL
Acceptance Corporation to the Seller and by the Seller to the Depositor;
WHEREAS the Depositor is willing to sell such receivables to the Issuer;
and
WHEREAS NAL Acceptance Corporation is willing to service such receivables;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
following meanings:
"AA" means Auto Analyst, Inc., a Georgia corporation, and any successor in
interest.
"Amount Financed" means, with respect to any Receivable, the amount
advanced under the Receivable toward the purchase price of the Financed Vehicle
and any related costs, exclusive of any amount allocable to the premium of "dual
interest" insurance covering the Financed Vehicle.
"Annual Percentage Rate" or "APR" of a Receivable means the annual rate of
finance charges stated in the related Contract.
"Backup Servicer" means, Bankers Trust Company, a New York banking
corporation, and its successors or assigns, when acting in its capacity as
Backup Servicer under this Agreement.
"Certificate Balance" equals, as of the Closing Date, the Initial
Certificate Balance and, thereafter, will equal the Initial Certificate Balance
reduced by all amounts allocable to principal previously distributed to
Certificateholders.
<PAGE>
"Certificate Distribution Account" has the meaning assigned to such term in
the Trust Agreement.
"Certificate Pool Factor" means, as of the close of business on the last
day of a Collection Period, a seven-digit decimal figure equal to the
Certificate Balance (after giving effect to any reductions therein to be made on
the immediately following Distribution Date) divided by the Initial Certificate
Balance. The Certificate Pool Factor will be 1.0000000 as of the Closing Date;
thereafter, the Certificate Pool Factor will decline to reflect reductions in
the Certificate Balance.
"Certificateholders" or "Holders" (when used in the context of the Holders
of Certificates) has the meaning assigned to such term in the Trust Agreement.
"Certificateholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Certificateholders' Principal Distributable
Amount and the Certificateholders' Interest Distributable Amount for such date.
"Certificateholders' Interest Carryover Shortfall" means, with respect to
any Distribution Date, (i) the excess of the Certificateholders' Interest
Distributable Amount for the preceding Distribution Date, over the amount in
respect of interest that is actually deposited in the Certificate Distribution
Account on such preceding Distribution Date, plus (ii) 90 days of interest on
the amount of such excess for such preceding Distribution Date, to the extent
permitted by law, at the Pass-Through Rate.
"Certificateholders' Interest Distributable Amount" means, with respect to
any Distribution Date, the sum of the Certificateholders' Quarterly Interest
Distributable Amount for such Distribution Date and the Certificateholders'
Interest Carryover Shortfall for such Distribution Date. Interest with respect
to the Certificates shall be computed on the basis of a 360-day year consisting
of twelve 30-day months for all purposes of this Agreement and the Basic
Documents.
"Certificateholders' Quarterly Interest Distributable Amount" means, with
respect to any Distribution Date, 90 days of interest at the Pass-Through Rate
on the Certificate Balance on the immediately preceding Distribution Date (or,
in the case of the first Distribution Date, on the Closing Date) after giving
effect to all payments of principal to Certificateholders on such immediately
preceding Distribution Date.
"Certificateholders' Quarterly Principal Distributable Amount" means, with
respect to any Distribution Date prior to the Distribution Date on which the
Notes are paid in full, zero; and with respect to any Distribution Date on or
after the Distribution Date on which the Notes are paid in full, 100% of the
Principal Distribution Amount for such Distribution Date
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<PAGE>
(less, on the Distribution Date on which the Notes are paid in full, the portion
thereof payable as principal of the Notes).
"Certificateholders' Principal Carryover Shortfall" means, as of the close
of a particular Distribution Date, the excess of the Certificateholders'
Quarterly Principal Distributable Amount and any outstanding Certificateholders'
Principal Carryover Shortfall from the preceding Distribution Date, over the
amount in respect of principal that is actually deposited in the Certificate
Distribution Account on such particular Distribution Date.
"Certificateholders' Principal Distributable Amount" means, with respect to
any Distribution Date, the sum of the Certificateholders' Quarterly Principal
Distributable Amount for such Distribution Date and the Certificateholders'
Principal Carryover Shortfall as of the close of the preceding Distribution
Date; provided, however, that the Certificateholders' Principal Distributable
Amount shall not exceed the Certificate Balance. In addition, on the Final
Scheduled Distribution Date, the principal required to be included in the
Certificateholders' Principal Distributable Amount will include the lesser of
(a) (i) any Scheduled Payments of principal due and remaining unpaid on each
Precomputed Receivable and (ii) any principal due and remaining unpaid on each
Simple Interest Receivable, in each case, in the Trust as of the Final Scheduled
Distribution Date or (b) the amount that is necessary (after giving effect to
the other amounts to be deposited in the Certificate Distribution Account on
such Distribution Date and allocable to principal) to reduce the Certificate
Balance to zero.
"Certificates" means the Trust Certificates (as defined in the Trust
Agreement).
"Closing Date" means September 27, 1996.
"Collection Account" means the account designated as such, established and
maintained pursuant to Section 5.01(a)(i).
"Collection Period" means the three calendar-month period ending on the
last day of the month preceding the month of each Distribution Date. Any amount
or balance stated as of the last day of a Collection Period shall give effect to
the following calculations as determined as of the close of business on such
last day: (1) all applications of collections, (2) all current and previous
Payaheads, (3) all applications of Payahead Balances and (4) all distributions
to be made on the following Distribution Date.
"Computer Tape" means a computer tape generated by the Servicer which
provides information relating to the Receivables.
"Contract" means a motor vehicle retail installment sale contract.
3
<PAGE>
"Corporate Trust Office" means the principal office of the Indenture
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of the execution of this Agreement is
located at Four Albany Street, New York, New York, Corporate Trust and Agency
Group, Structured Finance Team; or at such other address as the Indenture
Trustee may designate from time to time by notice to the Noteholders and the
Depositor, or the principal corporate trust office of any successor Indenture
Trustee (of which address such successor Indenture Trustee will notify the
Noteholders and the Depositor).
"Custodial Agreement" means the Custodial Agreement dated as of September
11, 1996, among the Issuer, Bankers Trust Company, as Indenture Trustee and
Custodian, and the Servicer.
"Custodian" means Bankers Trust Company, as Custodian under the Custodial
Agreement and any successor Custodian pursuant to the Custodial Agreement.
"Cutoff Date" means September 11, 1996.
"Dealer" means the dealer, SFI, AA or other entity who sold a Financed
Vehicle and who originated the related Contract or who acquired a Contract and
in either case assigned the related Receivable to NAL under an existing
agreement between it and NAL.
"Dealer Reserve Account" means the account designated as such, established
and maintained pursuant to Section 5.01.
"Delinquency Trigger Event" means, as to any Collection Period, that the
Average Three Month Delinquency Ratio as of the last day of such Collection
Period is greater than 6%. "Average Three Month Delinquency Ratio" means, as of
any date, the ratio of the average aggregate Principal Balances of Receivables
that are 60 days or more delinquent for each of the three prior calendar months
prior to such date to the average of the Pool Balances as of the end of such
periods.
"Delivery" when used with respect to Trust Account Property means:
(a) with respect to bankers' acceptances, commercial paper, negotiable
certificates of deposit and other obligations that constitute "instruments"
within the meaning of Section 9-105(1)(i) of the UCC and are susceptible of
physical delivery, transfer thereof to the Indenture Trustee or its nominee
or custodian by physical delivery to the Indenture Trustee or its nominee
or custodian endorsed to, or registered in the name of, the Indenture
Trustee or its nominee or custodian or endorsed in blank, and, with respect
to a "certificated security" (as defined in Section 8-102(1)(a) of the UCC)
transfer thereof (i) by delivery of such certificated security endorsed to,
or registered in the name of, the Indenture Trustee or its nominee or
custodian or endorsed in blank to a financial
4
<PAGE>
intermediary (as defined in Section 8-313 of the UCC) and the making by
such financial intermediary of entries on its books and records identifying
such certificated securities as belonging to the Indenture Trustee or its
nominee or custodian and the sending by such financial intermediary of a
confirmation of the purchase of such certificated security by the Indenture
Trustee or its nominee or custodian, or (ii) by delivery thereof to a
"clearing corporation" (as defined in Section 8-102(3) of the UCC) and the
making by such clearing corporation of appropriate entries on its books
reducing the appropriate securities account of the transferor and
increasing the appropriate securities account of a financial intermediary
by the amount of such certificated security, the identification by the
clearing corporation of the certificated securities for the sole and
exclusive account of the financial intermediary, the maintenance of such
certificated securities by such clearing corporation or a "custodian bank"
(as defined in Section 8-102(4) of the UCC) or the nominee of either
subject to the clearing corporation's exclusive control, the sending of a
confirmation by the financial intermediary of the purchase by the Indenture
Trustee or its nominee or custodian of such securities and the making by
such financial intermediary of entries on its books and records identifying
such certificated securities as belonging to the Indenture Trustee or its
nominee or custodian (all of the foregoing, "Physical Property"), and, in
any event, any such Physical Property in registered form shall be in the
name of the Indenture Trustee or its nominee or custodian; and such
additional or alternative procedures as may hereafter become appropriate to
effect the complete transfer of ownership of any such Trust Account
Property (as defined herein) to the Indenture Trustee or its nominee or
custodian, consistent with changes in applicable law or regulations or the
interpretation thereof;
(b) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to Federal book-entry regulations, the following
procedures, all in accordance with applicable law, including applicable
Federal regulations and Articles 8 and 9 of the UCC: book-entry
registration of such Trust Account Property to an appropriate book-entry
account maintained with a Federal Reserve Bank by a financial intermediary
which is also a "depository" pursuant to applicable Federal regulations and
issuance by such financial intermediary of a deposit advice or other
written confirmation of such book-entry registration to the Indenture
Trustee or its nominee or custodian of the purchase by the Indenture
Trustee or its nominee or custodian of such book-entry security; the making
by such financial intermediary of entries in its books and records
identifying such book-entry security held through the Federal Reserve
System pursuant to Federal book-entry regulations as belonging to the
Indenture Trustee or its
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nominee or custodian and indicating that such custodian holds such Trust
Account Property solely as agent for the Indenture Trustee or its nominee
or custodian; and such additional or alternative procedures as may
hereafter become appropriate to effect complete transfer of ownership of
any such Trust Account Property to the Indenture Trustee or its nominee or
custodian, consistent with changes in applicable law or regulations or the
interpretation thereof; and
(c) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not governed
by clause (b) above, registration on the books and records of the issuer
thereof in the name of the financial intermediary, the sending of a
confirmation by the financial intermediary of the purchase by the Indenture
Trustee or its nominee or custodian of such uncertificated security, and
the making by such financial intermediary of entries on its books and
records identifying such uncertificated certificates as belonging to the
Indenture Trustee or its nominee or custodian.
"Depositor" means AUTORICS II, Inc., a Delaware corporation and any
successor in interest.
"Distribution Date" means March 15, June 15, September 15 and December 15
of each year or, if such day is not a Business Day, the immediately following
Business Day, commencing on December 16, 1996.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), having corporate trust powers and
acting as trustee for funds deposited in such account, so long as any of the
securities of such depository institution shall have a credit rating from each
Rating Agency in one of its generic rating categories that signifies investment
grade.
"Eligible Institution" means (a) the corporate trust department of the
Indenture Trustee or the Owner Trustee or (b) a depository institution organized
under the laws of the United States of America or any one of the states thereof
or the District of Columbia (or any domestic branch of a foreign bank), which
(i) has either (A) a long-term unsecured debt rating of A or better by each
Rating Agency, or if not rated by each Rating Agency, of A or better by Standard
& Poor's, A1 or better by Moody's and, if rated by one of the Rating Agencies, A
or better by such agency and (ii) whose deposits are insured by the FDIC. If so
qualified, the Indenture Trustee or the Owner Trustee may be considered an
Eligible Institution for the purposes of clause (b) of this definition.
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"Eligible Investments" means book-entry securities, negotiable instruments
or securities represented by instruments in bearer or registered form which
evidence:
(a) direct obligations of, and obligations fully guaranteed as to the
full and timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any state thereof (or any domestic branch of a
foreign bank) and subject to supervision and examination by federal or
state banking or depository institution authorities; provided, however,
that at the time of the investment or contractual commitment to invest
therein, the commercial paper or other short-term unsecured debt
obligations thereof (other than such obligations the rating of which is
based on the credit of a Person other than such depository institution or
trust company) shall have a short-term credit rating from each Rating
Agency in the highest investment category granted thereby;
(c) commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from each Rating Agency
in the highest investment category granted thereby;
(d) investments in money market mutual funds having a rating from
Standard & Poor's and Moody's and, if any Rating Agency rates such fund,
from such agency in the highest investment category granted by each Rating
Agency so rating such fund (including funds for which the Indenture Trustee
or the Owner Trustee or any of their respective Affiliates is investment
manager or advisor);
(e) bankers' acceptances issued by any depository institution or trust
company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America
or any agency or instrumentality thereof the obligations of which are
backed by the full faith and credit of the United States of America, in
either case entered into with a depository institution or trust company
(acting as principal) described in clause (b); and
(g) any other investment with respect to which the Issuer or the
Servicer has received written notification from each Rating Agency that the
acquisition of such investment as an Eligible Investment will not result in
a withdrawal or downgrading of the ratings on the Notes or Certificates.
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"Excess Spread" shall have the meaning set forth in Section 5.06(a)(ii).
"FDIC" means the Federal Deposit Insurance Corporation.
"Final Scheduled Distribution Date" means the December 15, 2001
Distribution Date.
"Final Scheduled Maturity Date" means September 12, 2001.
"Financed Vehicle" means an automobile, light-duty truck or van, together
with all accessions thereto, securing an Obligor's indebtedness under the
related Receivable.
"Indenture" means the Indenture dated as of September 11, 1996, between the
Issuer and the Indenture Trustee.
"Indenture Trustee" means the Person acting as Indenture Trustee under the
Indenture, its successors in interest and any successor trustee under the
Indenture.
"Initial Certificate Balance" shall have the meaning set forth in the Trust
Agreement.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator, or similar official for
such Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs, and such decree or order
shall remain unstayed and in effect for a period of 60 consecutive days; or (b)
the commencement by such Person of a voluntary case under any applicable federal
or state bankruptcy, insolvency or other similar law now or hereafter in effect,
or the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator, or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due, or the taking of action by such
Person in furtherance of any of the foregoing.
"Insolvency Proceeds" shall have the meaning set forth in Section 9.01.
"Insurance Policies" means any physical damage, credit life, disability,
theft, mechanical breakdown, dual interest or guaranteed auto-protection
insurance policies or coverage relating to the Financed Vehicles or Obligors.
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"Investment Earnings" means, with respect to any Payment Determination
Date, the investment earnings (net of losses and investment expenses) on amounts
on deposit in the Trust Accounts (other than the Dealer Reserve Account) to be
deposited into the Collection Account and to be deemed to constitute a portion
of the Total Distribution Amount for the related Distribution Date pursuant to
Section 5.01(b).
"Issuer" means NAL Auto Trust 1996-3.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to a Receivable by operation of law as a result of any act or
omission by the related Obligor.
"Liquidated Receivable" means any defaulted Receivable as to which the
Servicer has determined that all amounts which it expects to recover from or on
account of such Receivables have been recovered or with respect to which the
related Financed Vehicle has been realized upon and disposed of and the proceeds
of such disposition have been received; provided that any Receivable which is
120 days or more past due shall be deemed to be a Liquidated Receivable.
"Liquidation Proceeds" means, with respect to any Liquidated Receivable,
the moneys collected in respect thereof, from whatever source, including
Insurance Policy proceeds, net of the sum of any amounts expended by the
Servicer in connection with such liquidation and any amounts required by law to
be remitted to the Obligor on such Liquidated Receivable.
"Loss Trigger Event" means, as to any Collection Period, that the Average
Six Month Realized Loss Ratio as of the last day of such Collection Period is
greater than 5%. The "Average Six Month Realized Loss Ratio" as of any date is
the ratio, expressed on an annualized basis, of the average of the aggregate
Realized Losses in respect of Liquidated Receivables for each of the six
calendar month periods (or lesser number of calendar months from the Cutoff
Date) prior to such date to the average of the Pool Balance as of the beginning
of such periods.
"Moody's" means Moody's Investors Service, Inc., and any successors in
interest.
"NAL" means NAL Acceptance Corporation, a Florida corporation and any
successor in interest.
"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 5.01.
"Note Final Scheduled Distribution Date" means the December 15, 2000
Distribution Date.
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"Note Pool Factor" means, as of the close of business on the last day of a
Collection Period, a seven-digit decimal figure equal to the Outstanding Amount
of the Notes divided by the original Outstanding Amount of the Notes. The Note
Pool Factor will be 1.0000000 as of the Closing Date; thereafter, the Note Pool
Factor will decline to reflect reductions in the Outstanding Amount of the
Notes.
"Noteholder" means the Person in whose name a Note is registered in the
Note Register.
"Noteholders' Distributable Amount" means, with respect to any Distribution
Date, the sum of the Noteholders' Principal Distributable Amount and the
Noteholders' Interest Distributable Amount for such Distribution Date.
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Distribution Date, (i) the excess of the Noteholders' Interest Distributable
Amount for the preceding Distribution Date, over the amount in respect of
interest that is actually deposited in the Note Distribution Account on such
preceding Distribution Date, plus (ii) 90 days of interest on the amount of such
excess for such preceding Distribution Date, to the extent permitted by law, at
the Note Rate.
"Noteholders' Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Quarterly Interest Distributable
Amount for such Distribution Date and the Noteholders' Interest Carryover
Shortfall for such Distribution Date. For all purposes of this Agreement and the
Basic Documents, interest with respect to the Notes shall be computed on the
basis of a 360-day year consisting of twelve 30-day months.
"Noteholders' Quarterly Interest Distributable Amount" means, with respect
to any Distribution Date, 90 days of interest on the Notes at the Note Rate on
the Outstanding Amount of the Notes on the immediately preceding Distribution
Date (or, in the case of the first Distribution Date, the Closing Date) after
giving effect to all payments of principal to the Noteholders on such
immediately preceding Distribution Date.
"Noteholders' Quarterly Principal Distributable Amount" means, with respect
to any Distribution Date, for so long as the Notes are outstanding, 100% of the
Principal Distribution Amount; provided, however, that on the Distribution Date
on which the Outstanding Amount of the Notes is reduced to zero, the portion, if
any, of the Principal Distribution Amount that is not applied to the Notes will
be applied to the principal of the Certificates.
"Noteholders' Principal Carryover Shortfall" means, as of the close of
business on a particular Distribution Date, the excess of the Noteholders'
Quarterly Principal Distributable Amount and any outstanding Noteholders'
Principal Carryover Shortfall from
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the preceding Distribution Date, over the amount in respect of principal that is
actually deposited in the Note Distribution Account on such particular
Distribution Date.
"Noteholders' Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Quarterly Principal Distributable
Amount for such Distribution Date and the Noteholders' Principal Carryover
Shortfall as of the close of the preceding Distribution Date; provided, however,
that the Noteholders' Principal Distributable Amount shall not exceed the
Outstanding Amount of the Notes. In addition, on the Final Scheduled
Distribution Date, the Noteholders' Principal Distributable Amount will not be
less than the amount that is necessary (after giving effect to all other amounts
to be deposited in the Note Distribution Account on such Distribution Date and
allocable to principal) to reduce the Outstanding Amount of the Notes to zero.
"Obligor" on a Receivable means the purchaser or co-purchasers of the
Financed Vehicle and any other Person who owes payments under the Receivable.
"Officers' Certificate" means a certificate signed by (a) the chairman of
the board, the president or any vice president and (b) a treasurer, assistant
treasurer, the controller or any assistant controller, secretary or assistant
secretary of the Seller, the Depositor, the Servicer or the Backup Servicer, as
appropriate.
"Opinion of Counsel" means one or more written opinions of counsel, who may
be an employee of or counsel to the Seller, the Depositor, Servicer or the
Backup Servicer, which counsel shall be acceptable to the Indenture Trustee, the
Owner Trustee or each Rating Agency, as applicable.
"Original Pool Balance" means the Pool Balance as of the Cutoff Date.
"Owner Trust Estate" has the meaning assigned to such term in the Trust
Agreement.
"Owner Trustee" means the Person acting as Owner Trustee under the Trust
Agreement, its successors in interest and any successor owner trustee under the
Trust Agreement.
"Pass-Through Rate" means 8.50% per annum.
"Payahead" on a Receivable that is a Precomputed Receivable means the
amount, as of the close of business on the last day of a Collection Period,
computed in accordance with Section 5.03 with respect to such Receivable.
"Payahead Account" means the account designated as such, established and
maintained pursuant to Section 5.01.
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"Payahead Balance" on a Receivable that is a Precomputed Receivable means
the sum, as of the close of business on the last day of a Collection Period, of
all Payaheads made by or on behalf of the Obligor with respect to such
Precomputed Receivable, as reduced by applications of previous Payaheads with
respect to such Precomputed Receivable pursuant to Section 5.03.
"Payment Determination Date" means, with respect to any Distribution Date,
the 10th day of the month (or if such day is not a Business Day, the next
succeeding Business Day) of such Distribution Date.
"Physical Property" has the meaning assigned to such term in the definition
of "Delivery" above.
"Pool Balance" means, as of the close of business on the last day of a
Collection Period or any other date of determination, the aggregate Principal
Balance of the Receivables as of such day (excluding Purchased Receivables and
Liquidated Receivables).
"Precomputed Receivable" means any Receivable under which the portion of a
payment allocable to earned interest (which may be referred to in the related
Contract as an add-on finance charge) and the portion allocable to the Amount
Financed is determined according to the sum of periodic balances or the sum of
monthly balances or any equivalent method or are monthly actuarial receivables.
"Principal Balance" means (a) with respect to any Precomputed Receivable as
of the close of business on the last day of a Collection Period, the Amount
Financed minus the sum of (i) that portion of all Scheduled Payments due on or
prior to such day allocable to principal using the actuarial or constant yield
method, (ii) any payment of the Purchase Amount with respect to the Precomputed
Receivable allocable to principal and (iii) any prepayment in full applied to
reduce the Principal Balance of the Precomputed Receivable and (b) with respect
to any Simple Interest Receivable as of the close of business on the last day of
a Collection Period, the Amount Financed minus the sum of (i) the portion of all
payments made by or on behalf of the related Obligor on or prior to such day and
allocable to principal using the Simple Interest Method and (ii) any payment of
the Purchase Amount with respect to the Simple Interest Receivable allocable to
principal.
"Principal Distribution Amount" means, with respect to any Distribution
Date, an amount equal to the sum of the following amounts with respect to the
related Collection Period (i) with respect to Precomputed Receivables, the
principal component of all monthly payments scheduled to be received with
respect to such Receivables and all prepayments in full of such Receivables
(including amounts with respect thereto withdrawn from the Payahead Account);
(ii) with respect to Simple Interest Receivables, that portion of all
collections on such Receivables allocable to principal; (iii) the Principal
Balance of all
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Precomputed Receivables that became Liquidated Receivables during such
Collection Period; (iv) all Liquidation Proceeds attributable to the principal
amount of Simple Interest Receivables that became Liquidated Receivables during
such Collection Period, plus all Realized Losses with respect to such Liquidated
Receivables; and (v) to the extent attributable to principal, the Purchase
Amount of each Receivable that was purchased by NAL or by the Servicer during
the related Collection Period.
"Purchase Amount" means the amount, as of the close of business on the last
day of a Collection Period, required to prepay in full a Receivable under the
terms thereof including interest to the end of the month of purchase.
"Purchased Receivable" means a Receivable purchased as of the close of
business on the last day of a Collection Period by the Servicer pursuant to
Section 4.07 or by NAL pursuant to Section 3.02.
"Rating Agency" means each of Fitch Investors Service, L.P. and Duff &
Phelps Credit Rating Co. and their successors in interest.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given 10 days' (or such shorter period as shall be
acceptable to such Rating Agency) prior notice thereof and that each Rating
Agency shall have notified the Depositor, the Servicer, the Owner Trustee and
the Indenture Trustee in writing that such action will not result in a reduction
or withdrawal of the then current rating of the Notes or the Certificates.
"Realized Losses" means, with respect to any Receivable that becomes a
Liquidated Receivable, the excess of the Principal Balance of such Liquidated
Receivable over Liquidation Proceeds
to the extent allocable to principal.
"Receivable" means any Contract listed on Schedule A (which Schedule may be
in the form of microfiche).
"Receivable Files" means the documents specified in Section 3.03.
"Receivables Purchase Agreement" means the Receivables Purchase Agreement
dated as of September 11, 1996, among NAL, Autorics, Inc., as seller, and the
Depositor, as purchaser.
"Recoveries" means, with respect to any Receivable that becomes a
Liquidated Receivable, monies collected in respect thereof, from whatever
source, during any Collection Period following the Collection Period in which
such Receivable became a Liquidated Receivable, net of the sum of any amounts
expended by the Servicer for the account of the Obligor and any amounts required
by law to be remitted to the Obligor.
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"Repossession Trigger Event" means, as to any Collection Period, that the
Average Six Month Repossession Ratio as of the last day of such Collection
Period is greater than 12%. "Average Six Month Repossession Ratio" as of any
date is the ratio (expressed on an annualized basis) of the average of the
aggregate Principal Balances of Receivables with respect to which the related
Financed Vehicle has been repossessed by the Servicer for each of the six
calendar months (or lesser number of calendar months since the Cutoff Date)
prior to such date to the average Pool Balances as of the beginning of such
periods.
"Reserve Account" means the account designated as such, established and
maintained pursuant to Section 5.01.
"Reserve Account Initial Deposit" means $3,850,000.00.
"Scheduled Payment" on a Precomputed Receivable means that portion of the
payment required to be made by the Obligor during a calendar month sufficient to
amortize the Principal Balance under the actuarial method over the term of the
Receivable and to provide interest at the APR.
"Seller" means AUTORICS, Inc., a Delaware corporation, and any successor in
interest.
"Servicer" means NAL, in its capacity as the servicer of the Receivables,
and each successor to NAL (in the same capacity) pursuant to Section 7.03 or
8.02.
"Servicer Default" means an event specified in Section 8.01.
"Servicer's Certificate" means an Officers' Certificate of the Servicer
delivered pursuant to Section 4.09, substantially in the form of Exhibit C.
"Servicing Fee" means the fee payable to the Servicer for services rendered
during a Collection Period, determined pursuant to Section 4.08.
"Servicing Fee Rate" means 3.00% per annum.
"SFI" means Special Finance, Inc., a Florida corporation, and any successor
in interest.
"Simple Interest Method" means the method of allocating a fixed level
payment to principal and interest, pursuant to which the portion of such payment
that is allocated to interest is equal to the product of the fixed rate of
interest multiplied by the unpaid principal balance multiplied by the period of
time elapsed since the preceding payment of interest was made, and the remainder
of such payment is allocable to principal.
"Simple Interest Receivable" means any Receivable under which the portion
of a payment allocable to interest and the portion
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allocable to principal is determined in accordance with the Simple Interest
Method.
"Specified Reserve Account Balance" means, with respect to any Distribution
Date, the greater of 9% of the Pool Balance on the close of business on the last
day of the related Collection Period and $1,400,000.00 until the first
Distribution Date on which the Pool Balance on the close of business on the last
day of the preceding Collection Period is less than or equal to $1,400,000.00.
On such Distribution Date and thereafter the Specified Reserve Account Balance
shall equal 100% of the Pool Balance on the close of business on the last day of
the related Collection Period. In no event, however, shall the Specified Reserve
Account Balance exceed the aggregate outstanding principal balance of the Notes
and the Certificates.
"Standard & Poor's" means Standard & Poor's Rating Services, a division of
the McGraw-Hill Companies and any successor in interest.
"Total Distribution Amount" means, with respect to a Distribution Date, the
sum of the following amounts with respect to the related Collection Period: (i)
that portion of all collections on the Receivables (including amounts withdrawn
from the Payahead Account but excluding amounts deposited into the Payahead
Account) allocable to principal and interest; (ii) all Liquidation Proceeds, and
all Recoveries in respect of Liquidated Receivables that were written off in
prior Collection Periods; (iii) the Purchase Amount of each Receivable that was
purchased by NAL or by the Servicer during the related Collection Period; and
(iv) Investment Earnings.
"Trigger Event" means any Distribution Date on which one or more of a
Delinquency Trigger Event, a Repossession Trigger Event or a Loss Trigger Event
has occurred with respect to the previously ended Collection Period. A Trigger
Event will be deemed to have terminated as to any Distribution Date (subject to
the reoccurrence of such event) if neither a Delinquency Trigger Event, a Loss
Trigger Event or a Repossession Trigger Event shall have occurred during the
related Collection Period.
"Trust" means the Issuer.
"Trust Account Property" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), including the Reserve Account Initial Deposit, and all
proceeds of the foregoing.
"Trust Accounts" has the meaning assigned thereto in Section 5.01.
"Trust Agreement" means the Trust Agreement dated as of September 11, 1996,
between the Depositor and the Owner Trustee.
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"Trust Officer" means, in the case of the Indenture Trustee, any Officer
within the Corporate Trust Office of the Indenture Trustee, including any Vice
President, Assistant Vice President, Secretary, Assistant Secretary or any other
officer of the Indenture Trustee customarily performing functions similar to
those performed by any of the above designated officers and also, with respect
to a particular matter, any other officer to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject and, with respect to the Owner Trustee, any officer in the Corporate
Trust Administration Department of the Owner Trustee with direct responsibility
for the administration of the Trust Agreement and the Basic Documents on behalf
of the Owner Trustee.
SECTION 1.02. Other Definitional Provisions.
(a) Capitalized terms used and not otherwise defined herein have the
meanings assigned to them in the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement or in any such certificate or other document, and accounting terms
partly defined in this Agreement or in any such certificate or other document to
the extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles. To the extent that the definitions of
accounting terms in this Agreement or in any such certificate or other document
are inconsistent with the meanings of such terms under generally accepted
accounting principles, the definitions contained in this Agreement or in any
such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Article, Section, Schedule and
Exhibit references contained in this Agreement are references to Articles,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation".
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented
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and includes (in the case of agreements or instruments) references to all
attachments thereto and instruments incorporated therein; references to a Person
are also to its permitted successors and assigns.
ARTICLE II
Conveyance of Receivables
SECTION 2.01. Conveyance of Receivables. (a) In consideration of the
Issuer's delivery on the Closing Date to or upon the order of the Depositor of
(i) Certificates with a Certificate Balance of $75,423.84 and (ii)
$69,508,385.61, the Depositor does hereby sell, transfer, assign, set over and
otherwise convey to the Issuer, without recourse (subject to the obligations
herein), all right, title and interest of the Depositor in and to (but none of
the Depositor's obligations with respect to):
(1) the Receivables and all moneys received thereon on and after the
Cutoff Date plus all Payaheads as of the Cutoff Date;
(2) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Receivables, any other right to realize upon
property securing a Receivable and any other interest of the Depositor in
such Financed Vehicles including the Depositor's right, title and interest
in the lien on the Financed Vehicles in the name of the Depositor's agent,
Autorics, Inc., NAL or SFI;
(3) any proceeds with respect to the Receivables from claims on any
Insurance Policies relating to Financed Vehicles or Obligors;
(4) proceeds of any recourse (but none of the obligations) to Dealers
on Receivables;
(5) any Financed Vehicle that shall have secured a Receivable and
shall have been acquired by or on behalf of the Seller, the Depositor, the
Servicer, or the Trust;
(6) the Receivables Files;
(7) all right, title and interest of the Depositor under the
Receivables Purchase Agreement, including, without limitation, the right of
the Depositor to cause NAL to purchase Receivables under certain
circumstances;
(8) the Trust Accounts; and
(9) the proceeds of any and all of the foregoing.
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ARTICLE III
The Receivables
SECTION 3.01. Representations and Warranties of the Depositor with Respect
to the Receivables. The Depositor makes the following representations and
warranties with respect to the Receivables on which the Issuer relies in
acquiring the Receivables and issuing the Notes and Certificates. Such
representations and warranties speak as of the execution and delivery of this
Agreement and as of the Closing Date, but shall survive the sale, transfer and
assignment of the Receivables to the Issuer and the pledge thereof to the
Indenture Trustee pursuant to the Indenture.
(a) Title. It is the intention of the Depositor that the transfer and
assignment herein contemplated constitute a sale of the Receivables from the
Depositor to the Issuer and that the beneficial interest in and title to the
Receivables not be part of the debtor's estate in the event of the filing of a
bankruptcy petition by or against the Depositor under any bankruptcy law. No
Receivable has been sold, transferred, assigned or pledged by the Depositor to
any Person other than the Issuer. Immediately prior to the transfer and
assignment herein contemplated, the Depositor had good and marketable title to
each Receivable, free and clear of all Liens and rights of others and,
immediately upon the transfer thereof, the Issuer shall have good and marketable
title to each Receivable, free and clear of all Liens and rights of others; and
the transfer has been perfected under the UCC.
(b) All Filings Made. All filings (including UCC filings) necessary in any
jurisdiction to give (i) the Issuer a first perfected ownership interest in the
Receivables and (ii) the Indenture Trustee a first perfected security interest
in the Receivables shall have been made.
SECTION 3.02. Repurchase upon Breach. The Depositor, the Servicer, the
Backup Servicer and the Issuer, as the case may be, shall inform the other
parties to this Agreement, NAL and the Indenture Trustee promptly, in writing,
upon the discovery of any breach of the Depositor's representations and
warranties made pursuant to Section 3.01 or of NAL's representations and
warranties made pursuant to Section 3.02(c) of the Receivables Purchase
Agreement. Unless any such breach shall have been cured by the last day of the
Collection Period following the discovery thereof by NAL or the receipt by NAL
of written notice thereof from the Owner Trustee, the Indenture Trustee, the
Depositor, the Servicer or the Backup Servicer, the Depositor, the Issuer or the
Owner Trustee shall enforce the obligation of NAL under the Receivables Purchase
Agreement, to purchase as of such last day any Receivable with respect to which
such a breach had occurred if such breach has a material and adverse effect on
the interests of the Depositor or the Trust in and to such Receivable. In
consideration for the purchased Receivable, NAL shall remit the Purchase Amount
in the manner specified in Section 6.02 of the
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Receivables Purchase Agreement. Subject to the provisions of Section 6.03, the
sole remedy of the Issuer, the Owner Trustee, the Indenture Trustee, the
Noteholders or the Certificateholders with respect to a breach of
representations and warranties pursuant to Section 3.01 and the agreement
contained in this Section shall be to require NAL to purchase Receivables
pursuant to this Section and the Receivables Purchase Agreement.
SECTION 3.03. Custody of Receivable Files. (a) In connection with the sale
and transfer of the Receivables pursuant to this Agreement, the Issuer,
simultaneously with the execution and delivery of this Agreement, is entering
into the Custodial Agreement with the Custodian pursuant to which the Issuer
appoints the Custodian, and the Custodian accepts such appointment, to act as
the agent and bailee of the Issuer (initially), the Indenture Trustee (until all
amounts in respect of the Notes have been paid) and thereafter the Issuer, all
in accordance with the terms of the Custody Agreement, for all purposes of
Article 9 of the UCC, as Custodian of the following documents or instruments,
which are hereby constructively delivered to the Issuer or Indenture Trustee, as
pledgee of the Issuer, as the case may be, with respect to each Receivable:
(i) a list of Receivables in the form of Schedule A hereto,
identifying such Receivable together with the Computer Tape identifying
such Receivable and a completed checklist in the form of Exhibit D hereto
(it being expressly understood and agreed that the Custodian and Indenture
Trustee have no duties or responsibilities for checking or verifying the
accuracy or completeness of such checklist);
(ii) the fully executed original Receivable with manual signatures and
Dealer endorsements, together with executed assignments thereof by NAL, the
Seller and the Depositor in blank, which assignments shall be substantially
in the form of Exhibit E hereto;
(iii) a written confirmation from the Servicer certifying as to the
Insurance Policies covering the Receivable and stating that they are in
full force and effect;
(iv) the original certificate of title relating to the Financed
Vehicle or (a) a copy of the application for a certificate of title and (b)
a copy of the existing title, lien entry form or receipt of registration or
(c) a copy of the related letter guarantee, in each case noting the lien of
NAL, the Seller or SFI; provided, however, that at any time during the term
hereof the Owner Trustee may request and require that the Depositor cause
the party in whose name the lien is noted to transfer such lien to the
Depositor;
(v) an original or copy of the credit application of the Obligor; and
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(vi) financing statements on Form UCC-1 listing the Owner Trustee as
the secured party with respect to each Receivable and the other items
conveyed pursuant to Section 2.01 and stamped to indicate filing with the
Office of the Secretary of State of the State of Florida and with the
Office of the Secretary of State of Delaware.
(b) Access to Records. The Servicer or the Custodian, as the case may be,
shall provide to (or in the case of the Custodian shall be required pursuant to
the Custodial Agreement to provide to) the Indenture Trustee, the Issuer, the
Backup Servicer, Noteholders and Certificateholders and their duly authorized
representatives, attorneys or auditors access to the Receivable Files in such
cases where the Indenture Trustee, the Issuer, a Noteholder or a
Certificateholder is required by applicable statutes or regulations to review
the related accounts, records and computer systems maintained by the Servicer or
the Custodian, as the case may be, such access being afforded without charge but
only upon reasonable request and during normal business hours at offices of the
Servicer or the Custodian, as the case may be, designated by the Servicer or the
Custodian. Nothing in this Section shall derogate from the obligation of the
Servicer or the Custodian to observe any applicable law prohibiting disclosure
of information regarding the Obligors, and the failure of the Servicer or the
Custodian to provide access as provided in this Section as the result of such
obligation shall not constitute a breach of this Section.
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.01. Duties of Servicer. The Servicer, for the benefit of the
Issuer (to the extent provided herein), shall manage, service, administer and
make collections on the Receivables (other than Purchased Receivables) with
reasonable care, acting prudently and in accordance with customary and usual
servicing procedures for other institutional servicers of receivables of the
type subject to this Agreement and applicable law, and to the degree not
inconsistent with the foregoing, using that degree of skill and attention that
the Servicer exercises with respect to all comparable automotive receivables
that it services for itself or others. The Servicer's duties shall include
collection and posting of all payments, responding to inquiries of Obligors on
such Receivables, investigating delinquencies, sending billing statements to
Obligors, reporting tax information to Obligors, accounting for collections, and
furnishing monthly, and annual statements to the Owner Trustee and the Indenture
Trustee with respect to distributions. Subject to the provisions of Section
4.02, the Servicer shall follow its customary standards, policies and procedures
in performing its duties as Servicer. Without limiting the generality of the
foregoing, the Servicer is authorized and empowered to execute and deliver, on
behalf of itself, the Issuer, the Owner Trustee,
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the Indenture Trustee, the Certificateholders and the Noteholders or any of
them, any and all instruments of satisfaction or cancellation, or partial or
full release or discharge, and all other comparable instruments, with respect to
such Receivables or to the Financed Vehicles securing such Receivables. If the
Servicer shall commence a legal proceeding to enforce a Receivable, the Issuer
(in the case of a Receivable other than a Purchased Receivable) shall thereupon
be deemed to have automatically assigned, solely for the purpose of collection,
such Receivable to the Servicer. If in any enforcement suit or legal proceeding
it shall be held that the Servicer may not enforce a Receivable on the ground
that it shall not be a real party in interest or a holder entitled to enforce
such Receivable, the Owner Trustee shall, at the Servicer's expense and
direction, take steps to enforce such Receivable, including bringing suit in its
name or the name of the Owner Trustee, the Indenture Trustee, the
Certificateholders or the Noteholders. The Owner Trustee shall (and the
Custodian pursuant to the Custodial Agreement shall be required) upon the
written request of the Servicer furnish the Servicer with any powers of attorney
and other documents reasonably necessary or appropriate to enable the Servicer
to carry out its servicing and administrative duties hereunder.
SECTION 4.02. Collection and Allocation of Receivable Payments. The
Servicer shall make reasonable efforts to collect all payments called for under
the terms and provisions of the Receivables as and when the same shall become
due and shall follow such collection procedures as it follows with respect to
all comparable automotive receivables that it services for itself or others. The
Servicer may grant extensions, rebates or adjustments on a Receivable or arrange
with the Obligor to extend or modify the payment schedule, which actions shall
not, for the purposes of this Agreement, modify the original due dates or
amounts of the Scheduled Payments on a Precomputed Receivable or the original
due dates or amounts of the originally scheduled payments of interest on Simple
Interest Receivables; provided, however, that if the Servicer extends the date
for final payment by the Obligor of any Receivable beyond the Final Scheduled
Maturity Date, it shall promptly repurchase the Receivable from the Issuer in
accordance with the terms of Section 4.07. The Servicer may in its discretion
waive any late payment charge or any other fees that may be collected in the
ordinary course of servicing a Receivable. The Servicer shall not agree to any
alteration of the interest rate on any Receivable or of the amount of any
Scheduled Payment on Precomputed Receivables or the originally scheduled
payments on Simple Interest Receivables.
SECTION 4.03. Realization upon Receivables. On behalf of the Issuer, the
Servicer shall use its best efforts, consistent with its customary servicing
procedures, to repossess or otherwise convert the ownership of and liquidate the
Financed Vehicle securing any Receivable as to which the Servicer shall have
determined eventual payment in full is unlikely. The Servicer shall follow such
customary and usual practices and
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procedures as it shall deem necessary or advisable in its servicing of
automotive receivables, which may include reasonable efforts to realize upon any
recourse to Dealers and selling the Financed Vehicle at public or private sale.
The foregoing shall be subject to the provision that, in any case in which the
Financed Vehicle shall have suffered damage, the Servicer shall not expend funds
in connection with the repair or the repossession of such Financed Vehicle
unless it shall determine in its discretion that such repair and/or repossession
will increase the Liquidation Proceeds by an amount greater than the amount of
such expenses. The Servicer may not sell any Financed Vehicles to J.D. Byrider
Systems, Inc. for less than 100% of such Financed Vehicles' wholesale value,
determined from the "Black Book".
SECTION 4.04. Insurance. The Servicer shall, in accordance with its
customary servicing procedures, require that each Obligor shall have obtained
physical damage and theft insurance covering the Financed Vehicle as of the
execution of the Receivable. The Servicer shall notify each insurer providing a
"guaranteed auto protection" insurance policy with respect to the Receivables to
include the Indenture Trustee as an additional insured and its payee on each
such policy. Upon receipt of notification that the insurance required pursuant
to the terms of any Receivable is not in place, the Servicer shall obtain "dual
interest" insurance chargeable to the Obligor in accordance with its customary
servicing procedures.
SECTION 4.05. Maintenance of Security Interests in Financed Vehicles. The
Servicer shall, in accordance with its customary servicing procedures, take such
steps as are necessary to maintain perfection of the security interest created
by each Receivable in the related Financed Vehicle. The Servicer is hereby
authorized to take such steps as are necessary to re-perfect such security
interest on behalf of the Issuer and the Indenture Trustee in the event of the
relocation of a Financed Vehicle or for any other reason.
SECTION 4.06. Covenants of Servicer. The Servicer shall not release the
Financed Vehicle securing any Receivable from the security interest granted by
such Receivable in whole or in part except in the event of payment in full by
the Obligor thereunder or repossession, nor shall the Servicer impair the rights
of the Issuer, the Indenture Trustee, the Certificateholders or the Noteholders
in such Receivable, nor shall the Servicer (except in the case of an extension
permitted pursuant to Section 4.02) increase the number of scheduled payments
due under a Receivable.
Neither NAL nor any Affiliate thereof shall incur liabilities of any kind
to SunTrust Bank, South Florida, National Association ("SunTrust"), if the total
amount of such liabilities outstanding at any time exceeds $10,000 except for
liabilities with respect to which SunTrust has expressly agreed to irrevocably
and unconditionally waive all right of set-off or other claims that it may have
under contract, applicable law or otherwise with
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respect to any funds or monies SunTrust may hold from time to time pursuant to
the Lock-box Agreement dated November 27, 1995 between NAL, SunTrust and General
Electric Capital Corporation, or any other agreement related to the holding of
any proceeds of the Receivables or the other property conveyed pursuant to
Section 2.01.
SECTION 4.07. Purchase of Receivables upon Breach. The Servicer or the
Owner Trustee shall inform the other party and the Indenture Trustee and the
Depositor promptly, in writing, upon the discovery of any breach pursuant to
Section 4.02, 4.05 or 4.06. Unless the breach shall have been cured by the last
day of the Collection Period following such discovery, the Servicer shall
purchase as of such last day any Receivable with respect to which such breach
had occurred if such breach has a material and adverse effect on the interests
of the Depositor or the Trust in and to such Receivable. If the Servicer takes
any action during any Collection Period pursuant to Section 4.02 that impairs
the rights of the Issuer, the Indenture Trustee, the Certificateholders or the
Noteholders in any Receivable or as otherwise provided in Section 4.02, the
Servicer shall purchase such Receivable as of the last day of such Collection
Period. In consideration of the purchase of any such Receivable pursuant to
either of the two preceding sentences, the Servicer shall remit the Purchase
Amount in the manner specified in Section 5.04. Subject to Section 7.02, the
sole remedy of the Issuer, the Owner Trustee, the Indenture Trustee, the
Certificateholders or the Noteholders with respect to a breach pursuant to
Section 4.02, 4.05 or 4.06 shall be to require the Servicer to purchase
Receivables pursuant to this Section. The Owner Trustee shall have no duty to
conduct any affirmative investigation as to the occurrence of any condition
requiring the repurchase of any Receivable pursuant to this Section.
SECTION 4.08. Servicing Fee. The Servicing Fee for a Distribution Date
shall equal the product of (a) one-fourth, (b) the Servicing Fee Rate and (c)
the Pool Balance as of the first day of the preceding Collection Period. The
Servicer shall also be entitled to all late fees, prepayment charges (including,
in the case of a Receivable that provides for payments according to the "Rule of
78s" and that is prepaid in full, the difference between the Principal Balance
of such Receivable (plus accrued interest to the date of prepayment) and the
principal balance of such Receivable computed according to the "Rule of 78s"),
and other administrative fees or similar charges allowed by applicable law with
respect to the Receivables, collected (from whatever source) on the Receivables,
plus any reimbursement pursuant to the last paragraph of Section 7.02.
SECTION 4.09. Servicer's Certificate. Not later than 11:00 a.m. (New York
time) on the 10th day of each month, or if such 10th day is not a Business Day,
the next succeeding Business Day, the Servicer shall deliver to the Owner
Trustee, each Paying Agent, the Indenture Trustee, the Backup Servicer (in
electronic media form acceptable to the Backup Servicer) and the Depositor,
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with a copy to the Rating Agencies, a Servicer's Certificate substantially in
the form attached hereto as Exhibit C setting forth the applicable information
for each of the items set forth therein. Receivables to be purchased by the
Servicer or by NAL shall be identified by the Servicer by account number with
respect to such Receivable (as specified in Schedule A).
SECTION 4.10. Annual Statement as to Compliance; Notice of Default. (a) The
Servicer shall deliver to the Owner Trustee and the Indenture Trustee, on or
before February 28 of each year beginning February 28, 1997, an Officers'
Certificate, dated as of December 31 of the preceding year, stating that (i) a
review of the activities of the Servicer during the preceding 12-month period
(or such shorter period as shall have elapsed since the Closing Date) and of its
performance under this Agreement has been made under such officers' supervision
and (ii) to the best of such officers' knowledge, based on such review, the
Servicer has fulfilled all its obligations under this Agreement throughout such
year or, if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officers and the nature and status
thereof. The Indenture Trustee shall send a copy of such certificate and the
report referred to in Section 4.11 to each Rating Agency. A copy of such
certificate and the report referred to in Section 4.11 may be obtained by any
Certificateholder or Noteholder by a request in writing to the Owner Trustee
addressed to the Corporate Trust Office. Upon the telephone request of the Owner
Trustee, the Indenture Trustee will promptly furnish the Owner Trustee with a
list of Noteholders as of the date specified by the Owner Trustee.
(b) The Servicer shall deliver to the Owner Trustee, the Indenture Trustee,
the Backup Servicer and each Rating Agency, promptly after having obtained
knowledge thereof, but in no event later than five (5) Business Days thereafter,
written notice in an Officers' Certificate of any event which with the giving of
notice or lapse of time, or both, would become a Servicer Default under Section
8.01.
SECTION 4.11. Annual Independent Certified Public Accountants' Report. The
Servicer shall cause a firm of independent certified public accountants, which
may also render other services to the Servicer, the Depositor or their
Affiliates, to deliver to the Owner Trustee and the Indenture Trustee on or
before February 28 of each year beginning February 28, 1997, a report addressed
to the Board of Directors of the Servicer, to the effect that such firm has
examined the financial statements of the Servicer for the preceding twelve
months or, in the case of the first such report, during such longer period that
shall have elapsed since the Closing Date) and issued its report thereon and
that such examination (a) was made in accordance with generally accepted
auditing standards and accordingly included such tests of the accounting records
and such other auditing procedures as such firm considered necessary in the
circumstances; (b) included tests relating to automotive loans
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serviced for others in accordance with the requirements of the Uniform Single
Audit Program for Mortgage Bankers (the "Program"), to the extent the procedures
in such Program are applicable to the servicing obligations set forth in this
Agreement; and (c) except as described in the report, disclosed no exceptions or
errors in the records relating to automobile, light-duty truck and van loans
serviced for others that, in the firm's opinion, paragraph four of such Program
requires such firm to report.
Such report will also indicate that the firm is independent of the Servicer
within the meaning of the Code of Professional Ethics of the American Institute
of Certified Public Accountants.
SECTION 4.12. Servicer Expenses. The Servicer shall be required to pay all
expenses incurred by it in connection with its activities hereunder, including
fees and disbursements of independent accountants, taxes imposed on the Servicer
and expenses incurred in connection with distributions and reports to
Certificateholders and Noteholders.
SECTION 4.13. Appointment of Subservicer. The Servicer may at any time
appoint a subservicer to perform all or any portion of its obligations as
Servicer hereunder; provided, however, that the Rating Agency Condition shall
have been satisfied in connection therewith; and provided, further, that the
Servicer shall remain obligated and be liable to the Issuer, the Owner Trustee,
the Indenture Trustee, the Certificateholders and the Noteholders for the
servicing and administering of the Receivables in accordance with the provisions
hereof without diminution of such obligation and liability by virtue of the
appointment of such subservicer and to the same extent and under the same terms
and conditions as if the Servicer alone were servicing and administering the
Receivables. The fees and expenses of the subservicer shall be as agreed between
the Servicer and its subservicer from time to time, and none of the Issuer, the
Owner Trustee, the Indenture Trustee, the Certificateholders or the Noteholders
shall have any responsibility therefor.
SECTION 4.14. Oversight of Servicing.
(a) Commencing on the date of execution of this Agreement and continuing
until the earlier of (i) the termination of the Trust created by the Trust
Agreement and (ii) the appointment of the Backup Servicer as Servicer under this
Agreement, the Servicer shall, on the last day of each calendar month, deliver
to the Backup Servicer in the Computer Tape format acceptable to the Backup
Servicer, such information as is necessary to permit the Backup Servicer to
service the Receivables in accordance with the provisions of this Agreement. The
Backup Servicer shall accept and store, but shall not be required to examine,
such information. Upon notice that the Servicer has resigned or upon
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the removal of the Servicer under this Agreement, the Backup Servicer shall
assume all responsibilities of the Servicer (or of Indenture Trustee or any
other Person then acting as successor to such Servicer in accordance with
Sections 8.01 and 8.02) under this Agreement within thirty days of such notice
or removal. The Backup Servicer shall service the Receivables in accordance with
provisions of this Agreement.
(b) On the date that each Servicer's Certificate is delivered by the
Servicer to the Owner Trustee and Indenture Trustee, the Servicer shall also
deliver a Computer Tape containing detailed information with respect to the
Receivables for the related Collection Period. The Backup Servicer shall
determine that (i) the Servicer's Certificate appears on its face to be complete
and (ii) that amounts credited to and withdrawn from the Trust Accounts and the
balance of such Trust Accounts are the same as the amount set forth in such
Servicer's Certificate. To the extent verifiable using the information contained
in the Servicer's Certificate, the Backup Servicer shall calculate and check
that the calculations made by the Servicer in the Servicer's Certificate are
mathematically accurate.
(c) In the event of any discrepancies or exceptions noted by the Backup
Servicer in the Servicer's Certificate, the Backup Servicer shall, within three
Business Days of its receipt of the Servicer's Certificate, notify the Servicer
of such discrepancies or exceptions. The Servicer shall consult with the Backup
Servicer and use its best efforts to ensure that such Servicer's Certificate is
corrected, and that subsequent Servicer's Certificates are accurate. If such
discrepancies or exceptions cannot be reconciled within 30 days, the Backup
Servicer's interpretation shall prevail for all subsequent Distribution Dates.
(d) The Backup Servicer will not be responsible for delays attributable to
the Servicer's failure to deliver information, defects in the information
supplied by Servicer or other circumstances beyond the control of the Backup
Servicer.
SECTION 4.15. Duties of Backup Servicer.
(a) The Backup Servicer shall perform such duties and only such duties as
are specifically set forth in this Agreement, and no implied covenants or
obligations shall be read into this Agreement against the Backup Servicer.
(b) In the absence of bad faith or negligence on its part, the Backup
Servicer may conclusively rely as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Backup Servicer and conforming to the requirements of this
Agreement.
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(c) The Backup Servicer shall not be required to expend or risk its own
funds or otherwise incur financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers, if the
repayment of such funds or adequate written indemnity against such risk or
liability is not reasonably assured to it in writing prior to the expenditure or
risk of such funds or incurrence of financial liability.
(d) The Servicer shall indemnify, defend and hold harmless the Backup
Servicer, its agents, officers, directors or employees from and against any
claim, action, loss, damage, penalty, fine, cost, expense, or other liability,
including court costs and reasonable attorney's fees and expenses, incurred as a
result of its acts or omissions or its breach of its own representations made in
this Agreement or the Backup Servicer's performance of its duties under this
Agreement. The right of indemnification provided hereby shall survive the
termination of this Agreement. The Servicer shall not be liable to the Backup
Servicer, under this Section 4.15 or otherwise, for the improper acts,
negligence or bad faith of the Backup Servicer.
ARTICLE V
Trust Accounts; Distributions; Reserve Account;
Statements to Certificateholders and Noteholders
SECTION 5.01. Establishment of Trust Accounts. (a) (i) The Servicer, for
the benefit of the Noteholders and the Certificateholders, shall establish
and maintain in the name of the Indenture Trustee an Eligible Deposit
Account (the "Collection Account"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the
Noteholders and the Certificateholders.
(ii) The Servicer, for the benefit of the Noteholders, shall
establish and maintain in the name of the Indenture Trustee an Eligible
Deposit Account (the "Note Distribution Account"), bearing a designation
clearly indicating that the funds deposited therein are held for the
benefit of the Noteholders.
(iii) The Servicer, for the benefit of the Noteholders and the
Certificateholders, shall establish and maintain in the name of the
Indenture Trustee an Eligible Deposit Account (the "Reserve Account"),
bearing a designation clearly indicating that the funds deposited therein
are held for the benefit of the Noteholders and the Certificateholders.
(iv) The Servicer, for the benefit of the Noteholders and the
Certificateholders, shall establish and maintain in the name of the
Indenture Trustee an Eligible Deposit Account
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(the "Payahead Account"), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Noteholders and the
Certificateholders.
(v) The Servicer, for the benefit of the Noteholders, the
Certificateholders and NAL, shall establish and maintain in the name of the
Indenture Trustee an Eligible Deposit Account (the "Dealer Reserve
Account") bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Noteholders, the
Certificateholders, the Depositor and NAL.
(b) With respect to the Collection Account, the Note Distribution Account,
the Reserve Account, the Payahead Account and the Dealer Reserve Amount
(collectively the "Trust Accounts") funds on deposit in such Trust Accounts
(other than the Note Distribution Account) shall be invested by the Indenture
Trustee in Eligible Investments. All such Eligible Investments of the Trust Fund
shall be held by the Indenture Trustee for the benefit of the beneficiaries of
such accounts; provided, that on each Payment Determination Date all interest
and other investment income (net of losses and investment expenses) on funds on
deposit in the Trust Accounts (other than the Dealer Reserve Account) shall be
deposited into the Collection Account and shall be deemed to constitute a
portion of the Total Distribution Amount for the related Distribution Date.
Investment income (net of losses and investment expenses) on the Dealer Reserve
Account will be payable on each Distribution Date to the Depositor. Other than
as permitted by each Rating Agency, funds on deposit in the Trust Accounts shall
be invested in Eligible Investments that will mature not later than the Business
Day immediately preceding the next Distribution Date. Funds deposited in a Trust
Account on a day which immediately precedes a Distribution Date are not required
to be invested overnight.
(c) (i) The Indenture Trustee shall possess all right, title and interest
in all funds on deposit from time to time in the Trust Accounts and in all
proceeds thereof (including all income thereon) and all such funds,
investments, proceeds and income shall be part of the Trust Estate. The
Trust Accounts shall be under the sole dominion and control of the
Indenture Trustee for the benefit of the Noteholders and the
Certificateholders (and in the case of the Dealer Reserve Account, NAL), as
the case may be. If, at any time, any of the Trust Accounts ceases to be an
Eligible Deposit Account, the Indenture Trustee (or the Servicer on its
behalf) shall within 10 Business Days (or such longer period, not to exceed
30 calendar days, as to which each Rating Agency may consent) establish a
new Trust Account as an Eligible Deposit Account and shall transfer any
cash and/or any investments to such new Trust Account.
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(ii) With respect to the Trust Account Property, the Indenture Trustee
agrees, by its acceptance hereof, that:
(A) any Trust Account Property that is held in deposit accounts
shall be held solely in the Eligible Deposit Accounts, subject to the
last sentence of Section 5.01(c)(i); and each such Eligible Deposit
Account shall be subject to the exclusive custody and control of the
Indenture Trustee, and the Indenture Trustee shall have sole signature
authority with respect thereto;
(B) any Trust Account Property that constitutes Physical Property
shall be delivered to the Indenture Trustee in accordance with
paragraph (a) of the definition of "Delivery" and shall be held,
pending maturity or disposition, solely by the Indenture Trustee or a
financial intermediary (as such term is defined in Section 8-313(4) of
the UCC) acting solely for the Indenture Trustee;
(C) any Trust Account Property that is a book-entry security held
through the Federal Reserve System pursuant to federal book-entry
regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" and shall be maintained by the Indenture
Trustee, pending maturity or disposition, through continued book-entry
registration of such Trust Account Property as described in such
paragraph; and
(D) any Trust Account Property that is an "uncertificated
security" under Article VIII of the UCC and that is not governed by
clause (C) above shall be delivered to the Indenture Trustee in
accordance with paragraph (c) of the definition of "Delivery" and
shall be maintained by the Indenture Trustee, pending maturity or
disposition, through continued registration of the Indenture Trustee's
(or its nominee's) ownership of such security.
(iii) The Servicer shall have the power, revocable by the Indenture
Trustee or by the Owner Trustee with the consent of the Indenture Trustee,
to instruct the Indenture Trustee to make withdrawals and payments from the
Trust Accounts for the purpose of permitting the Servicer or the Owner
Trustee to carry out its respective duties hereunder or permitting the
Indenture Trustee to carry out its duties under the Indenture.
(d) The Servicer shall on or prior to each Distribution Date (and prior to
deposits to the Note Distribution Account or the Certificate Distribution
Account) transfer from the Collection Account to the Payahead Account an amount
equal to the increase in the Payahead Balance as described in Section 5.03
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received by the Servicer during the related Collection Period or, if the
Payahead Balance decreased during such Collection Period, shall transfer an
amount equal to the amount of such decrease from the Payahead Account to the
Collection Account.
SECTION 5.02. Collections. The Servicer shall remit within two Business
Days of receipt thereof to the Collection Account all payments by or on behalf
of the Obligors with respect to the Receivables (other than Purchased
Receivables) and all Liquidation Proceeds and Recoveries, both as collected
during the Collection Period.
SECTION 5.03. Application of Collections. All collections for the
Collection Period shall be applied by the Servicer as follows:
With respect to each Receivable (other than a Purchased Receivable),
payments by or on behalf of the Obligor shall be applied first, in the case
of Precomputed Receivables, to the Scheduled Payment and, in the case of
Simple Interest Receivables, to interest and principal in accordance with
the Simple Interest Method. With respect to Precomputed Receivables, any
remaining excess shall be added to the Payahead Balance, and shall be
applied to prepay the Precomputed Receivable (in reduction of the Payahead
Balance as evidenced by a transfer of the net amount of such reduction from
the Payahead Account to the Collection Account), but only if the sum of
such excess and the previous Payahead Balance shall be sufficient to prepay
the Receivable in full. Otherwise, any such remaining excess payments shall
constitute a Payahead (as shall the accumulated amount of such excess on
the Receivables as of the Cut-off Date) and shall increase the Payahead
Balance. With respect to a Precomputed Receivable the related payment on
behalf of which is less than the Scheduled Payment, amounts (to the extent
of the related Payahead Balance) in respect of such deficiency will be
transferred from the Payahead Account to the Collection Account in
accordance with Section 5.01(d).
SECTION 5.04. Additional Deposits. The Servicer and the Depositor shall
deposit or cause to be deposited in the Collection Account the aggregate
Purchase Amount with respect to Purchased Receivables, and the Servicer shall
deposit therein all amounts to be paid under Section 9.01. The Servicer will
deposit the aggregate Purchase Amount with respect to Purchased Receivables in
the Collection Account when such obligations are due.
SECTION 5.05. Distributions. (a) On each Payment Determination Date, the
Servicer shall calculate all amounts required to be deposited in the Note
Distribution Account and the Certificate Distribution Account.
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(b) On each Distribution Date, the Servicer shall instruct the Indenture
Trustee (based on the information contained in the Servicer's Certificate
delivered on the related Payment Determination Date pursuant to Section 4.09) to
make the following deposits and distributions for receipt by the Servicer or
deposit in the applicable account by 1:00 p.m. (New York time), to the extent of
the Total Distribution Amount, in the following order of priority:
(i) only in the event NAL is not the Servicer, to the Servicer, the
Servicing Fee (and all unpaid Servicing Fees from prior Collection
Periods);
(ii) to the Note Distribution Account, from the Total Distribution
Amount remaining after the application of clause (i), the Noteholders'
Interest Distributable Amount;
(iii) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i) and
(ii), the Certificateholders' Interest Distributable Amount;
(iv) to the Note Distribution Account, from the Total Distribution
Amount remaining after the application of clauses (i) through (iii), the
Noteholders' Principal Distributable Amount;
(v) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i) through
(iv), the Certificateholders' Principal Distributable Amount;
(vi) to the Reserve Account, the Total Distribution Amount remaining
after application of clauses (i) through (v), as and to the extent provided
in Section 5.06;
(vii) for so long as NAL is the Servicer, to the Servicer, from the
Total Distribution Amount remaining after the application of clauses (i)
through (vi), the Servicing Fee and all unpaid Servicing Fees from prior
Collection Periods; and
(viii) to the Depositor, any remaining amount.
Notwithstanding that the Notes have been paid in full, the Indenture Trustee
shall continue to maintain the Collection Account hereunder until the
Certificate Balance is reduced to zero.
SECTION 5.06. Reserve Account. (a) (i) On the Closing Date, the Owner
Trustee will deposit, on behalf of the Depositor, the Reserve Account Initial
Deposit into the Reserve Account from the net proceeds of the sale of the Notes
and the Certificates.
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(ii) If on a Distribution Date (i) the amount on deposit in the
Reserve Account, after any withdrawals therefrom on or prior to such
Distribution Date, is less than the Specified Reserve Account Balance,
there shall be deposited into the Reserve Account on such Distribution Date
pursuant to Section 5.05(b)(vi) the portion of the Total Distribution
Amount on such Distribution Date remaining after payment of the Servicing
Fee (but only in the event NAL is not the Servicer), the Noteholders'
Interest Distributable Amount, the Certificateholders' Interest
Distributable Amount, the Noteholders' Principal Distributable Amount and
the Certificateholders' Principal Distributable Amount (such amount, the
"Excess Spread") until the amount on deposit in the Reserve Account equals
the Specified Reserve Account Balance for such Distribution Date and (ii) a
Trigger Event has occurred and not terminated, there shall be deposited
into the Reserve Account on such Distribution Date pursuant to Section
5.05(b)(vi) all of the Excess Spread, if any, for such Distribution Date.
(b) Unless a Trigger Event has occurred and has not terminated, if the
amount on deposit in the Reserve Account on any Distribution Date (after giving
effect to all deposits thereto or withdrawals therefrom on such Distribution
Date) is greater than the Specified Reserve Account Balance for such
Distribution Date, the Servicer shall instruct the Indenture Trustee to
distribute the amount of such excess to the Depositor. After the occurrence and
during the continuance of a Trigger Event no amounts will be released to the
Depositor from the Reserve Account (other than pursuant to clause (g) of this
Section 5.06, if applicable).
(c) In the event that the Noteholders' Interest Distributable Amount for a
Distribution Date exceeds the amount deposited into the Note Distribution
Account pursuant to Section 5.05(b)(ii) on such Distribution Date, the Servicer
shall instruct the Indenture Trustee to withdraw from the Reserve Account on
such Distribution Date an amount equal to such excess, to the extent of funds
available therein, and deposit such amount into the Note Distribution Account on
such Distribution Date.
(d) In the event that the Certificateholders' Interest Distributable Amount
for a Distribution Date exceeds the amount deposited into the Certificate
Distribution Account pursuant to Section 5.05(b)(iii) on such Distribution Date,
the Servicer shall instruct the Indenture Trustee to withdraw from the Reserve
Account on such Distribution Date an amount equal to such excess, to the extent
of funds available therein after giving effect to paragraph (c) above, and
deposit such amount into the Certificate Distribution Account on such
Distribution Date.
(e) In the event that the Noteholders' Principal Distributable Amount for a
Distribution Date exceeds the amount
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deposited into the Note Distribution Account pursuant to Section 5.05(b)(iv) on
such Distribution Date, the Servicer shall instruct the Indenture Trustee to
withdraw from the Reserve Account on such Distribution Date an amount equal to
such excess, to the extent of funds available therein after giving effect to
paragraphs (c) and (d) above, and deposit such amount into the Note Distribution
Account on such Distribution Date.
(f) In the event that the Certificateholders' Principal Distributable
Amount for a Distribution Date exceeds the amount deposited into the Certificate
Distribution Account pursuant to Section 5.05(b)(v) on such Distribution Date,
the Servicer shall instruct the Indenture Trustee to withdraw from the Reserve
Account on such Distribution Date an amount equal to such excess, to the extent
of funds available therein after giving effect to paragraphs (c), (d) and (e)
above, and deposit such amount into the Certificate Distribution Account on such
Distribution Date.
(g) Following the payment in full of the aggregate Outstanding Amount of
the Notes and the Certificate Balance and of all other amounts owing or to be
distributed hereunder or under the Indenture or the Trust Agreement to
Noteholders and Certificateholders and the termination of the Trust, any amount
remaining on deposit in the Reserve Account shall be distributed to the
Depositor.
(h) Upon any distribution to the Depositor of amounts from the Reserve Fund
in accordance with the terms hereof, neither the Noteholders nor the
Certificateholders will have any rights in, or claims to, such amounts.
SECTION 5.07. Statements to Certificateholders and Noteholders. (a) On or
prior to each Distribution Date, the Servicer shall provide to the Indenture
Trustee (with a copy to each Rating Agency and each Paying Agent) for the
Indenture Trustee to forward to each Noteholder of record as of the most recent
Record Date and to the Owner Trustee (with a copy to each Paying Agent) for the
Owner Trustee to forward to each Certificateholder of record as of the most
recent Record Date a statement substantially in the form of Exhibits A and B,
respectively, setting forth at least the following information as to the Notes
and the Certificates to the extent applicable:
(i) the amount of such distribution allocable to principal allocable
to the Notes and to the Certificates;
(ii) the amount of such distribution allocable to interest allocable
to the Notes and to the Certificates;
(iii) the Pool Balance as of the close of business on the last day of
the preceding Collection Period;
(iv) the Outstanding Amount of the Notes, the Note Pool Factor, the
Certificate Balance and the Certificate Pool Factor as of the close of
business on the last day of the
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preceding Collection Period, after giving effect to payments allocated to
principal reported under clause (i) above;
(v) the amount of the Servicing Fee paid to the Servicer with respect
to the related Collection Period;
(vi) the amount of aggregate Realized Losses, if any, with respect to
the related Collection Period;
(vii) the aggregate Principal Balance of Receivables that are 30 to 59
days, 60 to 89 days and 90 days or more delinquent;
(viii) the Average Three Delinquency Ratio, the Average Six Month
Repossession Ratio and the Average Six Month Realized Loss Ratio as of the
last day of the related Collection Period.
(ix) the Noteholders' Interest Carryover Shortfall, the Noteholders'
Principal Carryover Shortfall, the Certificateholders' Interest Carryover
Shortfall and the Certificateholders' Principal Carryover Shortfall, if
any, after giving effect to payments on such Distribution Date, and the
changes in such amounts from the preceding statement;
(x) the aggregate Purchase Amounts for Receivables, if any, that were
purchased by NAL or the Servicer during the related Collection Period;
(xi) the balance, if any, of the Reserve Account after giving effect
to deposits and withdrawals to be made on such Distribution Date, and the
change in such balance from the preceding Statement; and
(xii) the aggregate Payahead Balance.
Each amount set forth under clauses (i), (ii), (v) and (ix) above shall be
expressed as a dollar amount per $1,000 of original principal balance of a
Certificate or Note, as applicable.
(b) On or prior to the 15th day of each month that is not a month in
which a Distribution Date occurs and on or prior to each Distribution Date,
the Indenture Trustee shall forward to each Noteholder of record and the
Owner Trustee shall forward to each Certificateholder of record the
Servicer's Certificate provided to it pursuant to Section 4.09 (except that
on any Distribution Date information otherwise provided to such holder
pursuant to clause (a) of this Section 5.08 need not have been included in
such certificate).
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SECTION 5.08. Transfer of the Notes. In the event any Holder of the Notes
shall wish to transfer such Note, the Servicer shall provide to such Holder and
any prospective transferee designated by such Holder information regarding the
Notes and the Receivables and such other information as shall be necessary to
satisfy the condition to eligibility set forth in Rule 144A(d)(4) for transfer
of any such Note without registration thereof under the Securities Act of 1933,
as amended, pursuant to the exemption from registration provided by Rule 144A.
SECTION 5.09. Dealer Reserve Account. (a) On the Closing
Date, the Owner Trustee will deposit, on behalf of the Depositor,
an amount equal to $157,488.59 into the Dealer Reserve Account.
(b) On each Distribution Date, the Servicer shall be entitled to withdraw
from the Dealer Reserve Account for payment to NAL, an amount equal to the
amount payable or paid by NAL to Dealers (other than SFI and AA) during the
related Collection Period in respect of dealer reserves on the Receivables and
amounts to which NAL may be entitled from such dealer reserves under NAL's
agreements with such Dealers. After payment in full, or the provision for such
payment, of all amounts payable to Dealers (other than SFI and AA) in respect of
dealer reserves on the Receivables, any funds remaining on deposit in the Dealer
Reserve Account will be paid to the Depositor. Amounts on deposit in the Dealer
Reserve Account will not be available to make payments on the Securities or for
any other purpose other than that set forth above in this clause (b).
ARTICLE VI
The Depositor
SECTION 6.01. Representations of Depositor. The Depositor makes the
following representations on which the Issuer relies in acquiring the
Receivables and issuing the Notes and the Certificates. The representations
speak as of the execution and delivery of this Agreement and as of the Closing
Date and shall survive the sale of the Receivables to the Issuer and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Depositor is duly organized and
validly existing as a corporation in good standing under the laws of the State
of Delaware, with the corporate power and authority to own its properties and to
conduct its business as such properties are currently owned and such business is
presently conducted, and had at all relevant times, and has, the corporate
power, authority and legal right to acquire and own the Receivables.
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(b) Due Qualification. The Depositor is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of its
property or the conduct of its business shall require such qualifications.
(c) Power and Authority. The Depositor has the corporate power and
authority to execute and deliver this Agreement and to carry out its terms; the
Depositor has full power and authority to sell and assign the property to be
sold and assigned to and deposited with the Issuer, and the Depositor shall have
duly authorized such sale and assignment to the Issuer by all necessary
corporate action; and the execution, delivery and performance of this Agreement
has been duly authorized by the Depositor by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Depositor enforceable in accordance with its terms.
(e) No Violation. The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with, result
in any breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time) a default under, the certificate of
incorporation or bylaws of the Depositor, or any indenture, agreement or other
instrument to which the Depositor is a party or by which it is bound; or result
in the creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement or other instrument (other than
pursuant to the Basic Documents); or violate any law or, to the best of the
Depositor's knowledge, any order, rule or regulation applicable to the Depositor
of any court or of any federal or state regulatory body, administrative agency
or other governmental instrumentality having jurisdiction over the Depositor or
its properties.
(f) No Proceedings. There are no proceedings or investigations pending, or
to the Depositor's best knowledge, threatened, before any court, regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties: (i) asserting the invalidity
of this Agreement, the Receivables Purchase Agreement, the Indenture or any of
the other Basic Documents, the Notes or the Certificates, (ii) seeking to
prevent the issuance of the Notes or the Certificates or the consummation of any
of the transactions contemplated by this Agreement, the Receivables Purchase
Agreement, the Indenture or any of the other Basic Documents, (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by the Depositor of its obligations under, or the validity or
enforceability of, this Agreement, the Receivables Purchase Agreement, the
Indenture, any of the other Basic Documents, the Notes or the
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Certificates or (iv) which might adversely affect the federal or state income
tax attributes of the Notes or the Certificates.
(g) Principal Place of Business. The principal place of business and chief
executive office of the Depositor are located at the place set forth in Section
10.03(a) and such location has not changed since the date the Depositor was
incorporated.
(h) Use of Names. The legal name of Depositor is the name used by it in
this Agreement and Depositor has not changed its name since the date of its
incorporation and does not have trade names, fictitious names, assumed names or
"doing business" names.
(i) Solvency. Depositor is solvent and will not become insolvent after
giving effect to the transactions contemplated in this Agreement; Depositor is
paying its debts, if any, as they become due; Depositor, after giving effect to
the transactions contemplated in this Agreement, will have adequate capital to
conduct its business.
SECTION 6.02. Corporate Existence. (a) During the term of this Agreement,
the Depositor will keep in full force and effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the Basic Documents
and each other instrument or agreement necessary or appropriate to the proper
administration of this Agreement and the transactions contemplated hereby.
(b) During the term of this Agreement, the Depositor shall observe the
applicable legal requirements for the recognition of the Depositor as a legal
entity separate and apart from its Affiliates, including the following:
(i) the Depositor shall maintain corporate records and books of
account separate from those of its Affiliates;
(ii) except as otherwise provided in this Agreement, the Depositor
shall not commingle its assets and funds with those of its Affiliates;
(iii) the Depositor shall hold such appropriate meetings of its board
of directors as are necessary to authorize all the Depositor's corporate
actions required by law to be authorized by the board of directors, shall
keep minutes of such meetings and of meetings of its stockholder(s) and
observe all other customary corporate formalities (and any successor
Depositor not a corporation shall observe similar procedures in accordance
with its governing documents and applicable law);
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(iv) the Depositor shall at all times hold itself out to the public
under the Depositor's own name as a legal entity separate and distinct from
its Affiliates;
(v) all transactions and dealings between the Depositor and its
Affiliates will be conducted on an arm's-length basis;
(vi) except as provided for by the Basic Documents, the Depositor
shall not utilize NAL as its agent and shall not agree to act as the agent
of any other Person; and
(vii) the Depositor shall at all times have at least one director that
is an "Independent Director" as such term is defined in the certificate of
incorporation.
SECTION 6.03. Liability of Depositor; Indemnities. (a) The Depositor shall
be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Depositor under this Agreement.
(b) The Depositor shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee, the Certificateholders and the Noteholders
and any of the officers, directors, employees and agents of the Issuer, the
Owner Trustee and the Indenture Trustee from and against any loss, liability or
expense incurred by reason of (i) the Depositor's willful misfeasance, bad faith
or negligence in the performance of its duties under this Agreement or by reason
of reckless disregard of its obligations and duties under this Agreement and
(ii) the Depositor's or the Issuer's violation of federal or state securities
laws in connection with the offering and sale of the Notes and the Certificates.
Indemnification under this Section shall survive the resignation or removal
of the Owner Trustee or the Indenture Trustee and the termination of this
Agreement and shall include reasonable fees and expenses of counsel and expenses
of litigation. If the Depositor shall have made any indemnity payments pursuant
to this Section and the Person to or on behalf of whom such payments are made
thereafter shall collect any of such amounts from others, such Person shall
promptly repay such amounts to the Depositor, without interest.
SECTION 6.04. Merger or Consolidation of, or Assumption of the Obligations
of, Depositor. Any Person (a) into which the Depositor may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Depositor shall be a party or (c) which may succeed to the properties and assets
of the Depositor substantially as a whole, which Person in any of the foregoing
cases executes an agreement of assumption to perform every obligation of the
Depositor under this Agreement, shall be the successor to the Depositor
hereunder without the
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execution or filing of any document or any further act by any of the parties to
this Agreement; provided, however, that (i) immediately after giving effect to
such transaction, no representation or warranty made pursuant to Section 3.01
shall have been breached and no Servicer Default, and no event that, after
notice or lapse of time, or both, would become a Servicer Default shall have
occurred and be continuing, (ii) the Depositor shall have delivered to the Owner
Trustee and the Indenture Trustee an Officers' Certificate and an Opinion of
Counsel each stating that such consolidation, merger or succession and such
agreement of assumption comply with this Section and that all conditions
precedent, if any, provided for in this Agreement relating to such transaction
have been complied with, (iii) the Rating Agency Condition shall have been
satisfied with respect to such transaction and (iv) the Depositor shall have
delivered to the Owner Trustee and the Indenture Trustee an Opinion of Counsel
stating that, in the opinion of such counsel, either (A) all financing
statements and continuation statements and amendments thereto have been executed
and filed that are necessary fully to preserve and protect the interest of the
Owner Trustee and Indenture Trustee, respectively, in the Receivables and
reciting the details of such filings, or (B) no such action shall be necessary
to preserve and protect such interests. Notwithstanding anything herein to the
contrary, the execution of the foregoing agreement of assumption and compliance
with clauses (i), (ii), (iii) and (iv) above shall be conditions to the
consummation of the transactions referred to in clause (a), (b) or (c) above.
SECTION 6.05. Limitation on Liability of Depositor and Others. The
Depositor and any director, officer, employee or agent of the Depositor may rely
in good faith on the advice of counsel or on any document of any kind, prima
facie properly executed and submitted by any Person respecting any matters
arising hereunder. The Depositor shall not be under any obligation to appear in,
prosecute or defend any legal action that shall not be incidental to its
obligations under this Agreement and that in its opinion may involve it in any
expense or liability.
SECTION 6.06. Depositor May Own Certificates or Notes. The Depositor and
any Affiliate thereof may in its individual or any other capacity become the
owner or pledgee of Certificates or Notes with the same rights as it would have
if it were not the Depositor or an Affiliate thereof, except as expressly
provided herein or in any Basic Document.
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SECTION 6.07. Sale of Receivables. Depositor shall take no actions
inconsistent with the Trust's ownership of the Receivables. Depositor shall
promptly respond to any third-party inquiries regarding the Receivables by
indicating that ownership thereof has been transferred to the Trust.
ARTICLE VII
The Servicer; Backup Servicer
SECTION 7.01. Representations of Servicer. The Servicer makes the following
representations on which the Issuer relies in acquiring the Receivables and
issuing the Notes and the Certificates. The representations speak as of the
execution and delivery of this Agreement and as of the Closing Date and shall
survive the sale of the Receivables to the Issuer and the pledge thereof to the
Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer is duly organized and
validly existing as a corporation in good standing under the laws of the state
of its incorporation, with the corporate power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is presently conducted, and had at all relevant times, and
has, the corporate power, authority and legal right to acquire, own, sell and
service the Receivables.
(b) Due Qualification. The Servicer is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of property
or the conduct of its business (including the servicing of the Receivables as
required by this Agreement) shall require such qualifications.
(c) Power and Authority. The Servicer has the corporate power and authority
to execute and deliver this Agreement and to carry out its terms; and the
execution, delivery and performance of this Agreement have been duly authorized
by the Servicer by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Servicer enforceable in accordance with its terms.
(e) No Violation. The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof shall not conflict with,
result in any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time) a default under, the articles of
incorporation or bylaws of the Servicer, or any indenture, agreement or other
instrument to which the Servicer is a party or
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by which it is bound; or result in the creation or imposition of any Lien upon
any of its properties pursuant to the terms of any such indenture, agreement or
other instrument (other than this Agreement); or violate any law or any order,
rule or regulation applicable to the Servicer of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or its properties.
(f) No Proceedings. There are no proceedings or investigations pending or,
to the Servicer's best knowledge, threatened, before any court, regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Servicer or its properties: (i) asserting the invalidity of this
Agreement, the Receivables Purchase Agreement, the Indenture, any of the other
Basic Documents, the Notes or the Certificates, (ii) seeking to prevent the
issuance of the Notes or the Certificates or the consummation of any of the
transactions contemplated by this Agreement, the Receivables Purchase Agreement,
the Indenture or any of the other Basic Documents, (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by the Servicer of its obligations under, or the validity or
enforceability of, this Agreement, the Receivables Purchase Agreement, the
Indenture, any of the other Basic Documents, the Notes or the Certificates or
(iv) relating to the Servicer and which might adversely affect the federal or
state income tax attributes of the Notes or the Certificates.
(g) No Insolvent Obligors. As of the Cutoff Date, no Obligor on a
Receivable is shown on the Receivable Files as the subject of a bankruptcy
proceeding.
SECTION 7.02. Indemnities of Servicer. The Servicer shall be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer under this Agreement:
(a) The Servicer shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee, the Backup Servicer, the Noteholders, the
Certificateholders, and the Depositor, their respective officers, directors,
employees and agents from and against any and all costs, expenses, losses,
damages, claims and liabilities, arising out of or resulting from the use,
ownership or operation by the Servicer or any Affiliate thereof of a Financed
Vehicle.
(b) The Servicer shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee, the Backup Servicer and the Depositor and
their respective officers, directors, employees and agents from and against any
taxes that may at any time be asserted against any such Person with respect to
the transactions contemplated herein and in the
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Basic Documents, including any sales, gross receipts, general corporation,
tangible personal property, privilege or license taxes (but, in the case of the
Issuer, not including any taxes asserted with respect to, and as of the date of,
the sale of the Receivables to the Issuer or the issuance and original sale of
the Certificates and the Notes, or asserted with respect to ownership of the
Receivables, or federal or other income taxes arising out of distributions on or
transfers of the Certificates or the Notes) and costs and expenses in defending
against the same.
(c) The Servicer shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee, the Backup Servicer, the Depositor, the
Certificateholders and the Noteholders and their respective officers, directors,
employees and agents from and against any and all costs, expenses, losses,
claims, damages and liabilities to the extent that such cost, expense, loss,
claim, damage or liability arose out of, or was imposed upon any such Person
through, the negligence, willful misfeasance or bad faith of the Servicer in the
performance of its duties under this Agreement or by reason of reckless
disregard of its obligations and duties under this Agreement.
(d) The Servicer shall indemnify, defend and hold harmless the Owner
Trustee and the Indenture Trustee and their respective officers, directors,
employees and agents from and against all costs, expenses, losses, claims,
damages and liabilities arising out of or incurred in connection with the
acceptance or performance of the trusts and duties herein and in the Trust
Agreement contained, in the case of the Owner Trustee, and in the Indenture
contained, in the case of the Indenture Trustee, except to the extent that such
cost, expense, loss, claim, damage or liability: (i) in the case of the Owner
Trustee, shall be due to the willful misfeasance, bad faith or negligence
(except for errors in judgment) of the Owner Trustee or, in the case of the
Indenture Trustee, shall be due to the willful misfeasance, bad faith or
negligence (except for errors in judgment) of the Indenture Trustee; or (ii) in
the case of the Owner Trustee, shall arise from the breach by the Owner Trustee
of any of its representations or warranties set forth in Section 7.03 of the
Trust Agreement.
(e) The Servicer shall pay any and all taxes levied or assessed upon all or
any part of the Owner Trust Estate.
For purposes of this Section, in the event of the termination of the rights
and obligations of NAL (or any successor thereto pursuant to Section 7.03) as
Servicer pursuant to Section 8.01, or a resignation by such Servicer pursuant to
this Agreement, such Servicer shall be deemed to be the Servicer pending
appointment of a successor Servicer (other than the Indenture Trustee) pursuant
to Section 8.02.
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Indemnification under this Section shall survive the resignation or removal
of the Owner Trustee or the Indenture Trustee or the termination of this
Agreement and shall include reasonable fees and expenses of counsel and expenses
of litigation. If the Servicer shall have made any indemnity payments pursuant
to this Section and the Person to or on behalf of whom such payments are made
thereafter collects any of such amounts from others, such Person shall promptly
repay such amounts to the Servicer, without interest.
SECTION 7.03. Merger or Consolidation of, or Assumption of the Obligations
of, Servicer. Any Person (a) into which the Servicer may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Servicer shall be a party, (c) which may succeed to the properties and assets of
the Servicer substantially as a whole or (d) with respect to the Servicer's
obligations hereunder, which is a corporation 50% or more of the voting stock of
which is owned, directly or indirectly, by NAL, which Person executed an
agreement of assumption to perform every obligation of the Servicer hereunder,
shall be the successor to the Servicer under this Agreement without further act
on the part of any of the parties to this Agreement; provided, however, that (i)
immediately after giving effect to such transaction, no Servicer Default and no
event which, after notice or lapse of time, or both, would become a Servicer
Default shall have occurred and be continuing, (ii) the Servicer shall have
delivered to the Owner Trustee and the Indenture Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this Section
and that all conditions precedent provided for in this Agreement relating to
such transaction have been complied with, (iii) the Rating Agency Condition
shall have been satisfied with respect to such transaction, (iv) immediately
after giving effect to such transaction, the successor to the Servicer shall
become the Administrator under the Administration Agreement in accordance with
Section 8 of such Agreement and (v) the Servicer shall have delivered to the
Owner Trustee and the Indenture Trustee an Opinion of Counsel stating that, in
the opinion of such counsel, either (A) all financing statements and
continuation statements and amendments thereto have been executed and filed that
are necessary fully to preserve and protect the interest of the Owner Trustee
and the Indenture Trustee, respectively, in the Receivables and reciting the
details of such filings or (B) no such action shall be necessary to preserve and
protect such interests. Notwithstanding anything herein to the contrary, the
execution of the foregoing agreement of assumption and compliance with clauses
(i), (ii), (iii), (iv) and (v) above shall be conditions to the consummation of
the transactions referred to in clause (a), (b) or (c) above.
SECTION 7.04. Limitation on Liability of Servicer and Others. Neither the
Servicer nor any of the directors, officers,
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employees or agents of the Servicer shall be under any liability to the Issuer,
the Noteholders or the Certificateholders, except as provided under this
Agreement, for any action taken or for refraining from the taking of any action
pursuant to this Agreement or for errors in judgment; provided, however, that
this provision shall not protect the Servicer or any such person against any
liability that would otherwise be imposed by reason of willful misfeasance, bad
faith or negligence in the performance of duties or by reason of reckless
disregard of obligations and duties under this Agreement. The Servicer and any
director, officer, employee or agent of the Servicer may rely in good faith on
any document of any kind prima facie properly executed and submitted by any
person respecting any matters arising under this Agreement.
Except as provided in this Agreement, the Servicer shall not be under any
obligation to appear in, prosecute or defend any legal action that shall not be
incidental to its duties to service the Receivables in accordance with this
Agreement and that in its opinion may involve it in any expense or liability;
provided, however, that the Servicer may undertake any reasonable action that it
may deem necessary or desirable in respect of this Agreement and the Basic
Documents and the rights and duties of the parties to this Agreement and the
Basic Documents and the interests of the Certificateholders under the Trust
Agreement and the Noteholders under the Indenture.
SECTION 7.05. NAL Not To Resign as Servicer. Subject to the provisions of
Section 7.03, NAL shall not resign from the obligations and duties hereby
imposed on it as Servicer under this Agreement except upon a determination that
the performance of its duties under this Agreement shall no longer be
permissible under applicable law. Notice of any such determination permitting
the resignation of NAL shall be communicated to the Owner Trustee and the
Indenture Trustee at the earliest practicable time (and, if such communication
is not in writing, shall be confirmed in writing at the earliest practicable
time) and any such determination shall be evidenced by an Opinion of Counsel to
such effect delivered to the Owner Trustee and the Indenture Trustee
concurrently with or promptly after such notice. No such resignation shall
become effective until the Indenture Trustee or a successor Servicer shall (i)
have assumed the responsibilities and obligations of NAL in accordance with
Section 8.02 and (ii) have become the Administrator under the Administration
Agreement in accordance with Section 8 of such Agreement.
SECTION 7.06. Representations of Backup Servicer. The Backup Servicer makes
the following representations on which the Issuer relies in acquiring the
Receivables and issuing the Notes and the Certificates. The representations
speak as of the execution and delivery of this Agreement and as of the Closing
Date and shall survive the sale of the Receivables to the Issuer
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and the pledge thereof to the Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Backup Servicer is duly organized
and validly existing as a New York banking corporation in good standing under
the laws of the state of its incorporation, with the corporate power and
authority to own its properties and to conduct its business as such properties
are currently owned and such business is presently conducted, and had at all
relevant times, and has, the corporate power, authority and legal right to
acquire, own, sell and service the Receivables.
(b) Due Qualification. The Backup Servicer is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or lease of
property or the conduct of its business (including the servicing of the
Receivables as required by this Agreement) shall require such qualifications.
(c) Power and Authority. The Backup Servicer has the corporate power and
authority to execute and deliver this Agreement and to carry out its terms; and
the execution, delivery and performance of this Agreement have been duly
authorized by the Backup Servicer by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Backup Servicer enforceable in accordance with its
terms.
SECTION 7.07. Merger or Consolidation of, or Assumption of the Obligations
of, Backup Servicer. Any Person (a) into which the Backup Servicer may be merged
or consolidated, (b) which may result from any merger or consolidation to which
the Backup Servicer shall be a party, (c) which may succeed to the properties
and assets of the Backup Servicer substantially as a whole or (d) with respect
to the Backup Servicer's obligations hereunder, shall be the successor to the
Backup Servicer under this Agreement without further act on the part of any of
the parties to this Agreement.
SECTION 7.08. Resignation as Backup Servicer. Subject to the provisions of
Section 7.07, the Backup Servicer may resign upon 30 days' written notice to the
Indenture Trustee and the Owner Trustee; provided, however, that no such
resignation shall become effective unless and until a successor reasonably
acceptable to the Indenture Trustee and the Owner Trustee shall have assumed the
responsibilities and obligations of the Backup Servicer and the Rating Agency
Condition shall have been satisfied in connection therewith; provided, further,
that if the Backup Servicer shall have resigned after its determination that the
performance of its duties under this Agreement shall no
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longer be permissible under applicable law as evidenced by an Opinion of Counsel
to such effect delivered to the Owner Trustee and the Indenture Trustee, then,
in the event a successor Backup Servicer is not appointed within 30 days after
such a resignation, the Backup Servicer may petition a court for its removal.
ARTICLE VIII
Default
SECTION 8.01. Servicer Default. If any one of the following events (a
"Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to deliver or cause to be delivered to the
Owner Trustee or the Indenture Trustee, as applicable, for deposit in any of the
Trust Accounts or the Certificate Distribution Account any required payment or
to direct the Owner Trustee or the Indenture Trustee, as applicable, to make any
required distributions therefrom, which failure continues unremedied for a
period of five Business Days after discovery of such failure by an officer of
the Servicer, or after the date on which written notice of such failure shall
have been given (A) to the Servicer by the Owner Trustee or the Indenture
Trustee, as applicable, or (B) to the Servicer, and to the Owner Trustee and the
Indenture Trustee, as applicable, by the Holders of Notes, evidencing not less
than 25% of the Outstanding Amount of the Notes or, if the Notes have been paid
in full, by Holders of Certificates evidencing not less than 25% of the
outstanding Certificate Balance; or
(b) failure by the Servicer duly to observe or to perform in any material
respect any other covenants or agreements of the Servicer set forth in this
Agreement or any other Basic Document, which failure shall (i) materially and
adversely affect the rights of Certificateholders or Noteholders and (ii)
continue unremedied for a period of 60 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been given
(A) to the Servicer by the Owner Trustee or the Indenture Trustee or (B) to the
Servicer, and to the Owner Trustee and the Indenture Trustee by the Holders of
Notes or Certificates, as applicable, evidencing not less than 25% of the
Outstanding Amount of the Notes or 25% of the outstanding Certificate Balance;
or
(c) the occurrence of an Insolvency Event with respect to the Servicer;
then, and in each and every case, so long as the Servicer Default shall not have
been remedied, either the Indenture Trustee or the Holders of Notes evidencing
not less than 25% of the Outstanding Amount of the Notes, by notice then given
in writing to the
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Servicer (and to the Indenture Trustee and the Owner Trustee if given by the
Noteholders) may terminate all the rights and obligations (other than the
obligations set forth in Section 7.02 hereof) of the Servicer under this
Agreement. On or after the receipt by the Servicer of such written notice, all
authority and power of the Servicer under this Agreement, whether with respect
to the Notes, the Certificates or the Receivables or otherwise, shall, without
further action, pass to and be vested in the Indenture Trustee or such successor
Servicer as may be appointed under Section 8.02; and, without limitation, the
Indenture Trustee and the Owner Trustee are hereby authorized and empowered to
execute and deliver, for the benefit of the predecessor Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments, and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer and
endorsement of the Receivables and related documents, or otherwise. The
predecessor Servicer shall cooperate with the successor Servicer, the Indenture
Trustee and the Owner Trustee in effecting the termination of the
responsibilities and rights of the predecessor Servicer under this Agreement,
including the transfer to the successor Servicer for administration by it of all
cash amounts that shall at the time be held by the predecessor Servicer for
deposit, or shall thereafter be received by it with respect to any Receivable.
All reasonable costs and expenses (including, without limitation, attorneys'
fees and any expenses relating to the conversion of computer files) incurred in
connection with transferring the Receivable Files to the successor Servicer and
amending this Agreement to reflect such succession as Servicer pursuant to this
Section shall be paid by the predecessor Servicer upon presentation of
reasonable documentation of such costs and expenses. Upon receipt of notice of
the occurrence of a Servicer Default, the Owner Trustee shall give notice
thereof to each Rating Agency.
SECTION 8.02. Appointment of Successor. (a) Upon the Servicer's receipt of
notice of termination pursuant to Section 8.01 or the Servicer's resignation in
accordance with the terms of this Agreement, the predecessor Servicer shall
continue to perform its functions as Servicer under this Agreement, in the case
of termination, only until the date specified in such termination notice or, if
no such date is specified in a notice of termination, until receipt of such
notice and, in the case of resignation, until the later of (i) the date 45 days
from the delivery to the Owner Trustee, the Indenture Trustee and the Backup
Servicer of written notice of such resignation (or written confirmation of such
notice) in accordance with the terms of this Agreement and (ii) the date upon
which the predecessor Servicer shall become unable to act as Servicer, as
specified in the notice of resignation and accompanying Opinion of Counsel. In
the event of the Servicer's termination hereunder, the Indenture Trustee shall
appoint a successor Servicer, and the successor Servicer shall accept its
appointment (including its appointment
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as Administrator under the Administration Agreement as set forth in Section
8.02(b)) by a written assumption in form acceptable to the Owner Trustee and the
Indenture Trustee. If the Indenture Trustee appoints the Backup Servicer as
successor Servicer in accordance with Section 7.03 or 8.01 (after confirmation
from each Rating Agency that such appointment will not result in the withdrawal
or downgrade of the then current ratings of the Notes and the Certificates), the
Backup Servicer shall be the successor in all respects to the Servicer in its
capacity as Servicer under this Agreement and the transactions set forth or
provided for herein and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the terms and provisions
hereof; provided, however, that the Backup Servicer shall not be liable for any
acts or omissions of the Servicer occurring prior to such succession or for any
breach by the Servicer of any of its representations and warranties contained
herein or in any related document or agreement. Notwithstanding the above, if
the Backup Servicer is legally unable or unwilling to act as Servicer, the
Indenture Trustee will appoint a successor Servicer to act as Servicer, the
effectiveness of which appointment shall be subject to confirmation from each
Rating Agency that such appointment will not result in the withdrawal or
downgrade of the then current ratings of the Notes and the Certificates. As
compensation for acting as successor Servicer, the Backup Servicer shall be
entitled to receive the Servicing Fee. In the event that a successor Servicer
has not been appointed at the time when the predecessor Servicer has ceased to
act as Servicer in accordance with this Section, the Indenture Trustee without
further action shall automatically be appointed the successor Servicer and the
Indenture Trustee shall be entitled to the Servicing Fee. Notwithstanding the
above, the Indenture Trustee shall, if it shall be legally unable so to act,
appoint or petition a court of competent jurisdiction to appoint any established
institution, having a net worth of not less than $50,000,000 and whose regular
business shall include the servicing of automotive receivables, as the successor
to the Servicer under this Agreement.
(b) Upon appointment, the successor Servicer (including the Indenture
Trustee acting as successor Servicer) shall (i) be the successor in all respects
to the predecessor Servicer and shall be subject to all the responsibilities,
duties and liabilities arising thereafter relating thereto placed on the
predecessor Servicer and shall be entitled to the Servicing Fee and all the
rights granted to the predecessor Servicer by the terms and provisions of this
Agreement and (ii) become the Administrator under the Administration Agreement
in accordance with Section 8 of such Agreement.
(c) The Servicer may not resign unless it is prohibited from serving as
such by law.
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SECTION 8.03. Notification to Noteholders and Certificateholders. Upon any
termination of, or appointment of a successor to the Servicer pursuant to this
Article VIII, the Owner Trustee shall give prompt written notice thereof to
Certificateholders, and the Indenture Trustee shall give prompt written notice
thereof to Noteholders and each Rating Agency.
SECTION 8.04. Waiver of Past Defaults. The Holders of Notes evidencing not
less than a majority of the Outstanding Amount of the Notes or the Holders of
Certificates evidencing not less than a majority of the outstanding Certificate
Balance (in the case of any default which does not adversely affect the
Indenture Trustee or the Noteholders) may, on behalf of all Noteholders and
Certificateholders, waive in writing any default by the Servicer in the
performance of its obligations hereunder and its consequences, except a default
in making any required deposits to or payments from any of the Trust Accounts in
accordance with this Agreement or in respect of a covenant or the Servicer or
provision herein that cannot be waived without the consent of each
Securityholder (which event the related waiver will require the approval of the
Holders of all Securities). Upon any such waiver of a past default, such default
shall cease to exist, and any Servicer Default arising therefrom shall be deemed
to have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent
thereto.
ARTICLE IX
Termination
SECTION 9.01. Optional Purchase of All Receivables. (a) As of the last day
of any Collection Period immediately preceding a Distribution Date as of which
the then outstanding Pool Balance is 5% or less of the Original Pool Balance,
the Servicer shall have the option to purchase the Owner Trust Estate, other
than the Trust Accounts and the Certificate Distribution Account. To exercise
such option, the Servicer shall deposit pursuant to Section 5.04 in the
Collection Account an amount equal to the aggregate Purchase Amount for the
Receivables (including defaulted Receivables), plus the appraised value of any
such other property held by the Trust other than the Trust Accounts and the
Certificate Distribution Account, such value to be determined by an appraiser
mutually agreed upon by the Servicer, the Owner Trustee and the Indenture
Trustee, and shall succeed to all interests in and to the Trust. Notwithstanding
the foregoing, the Servicer shall not be permitted to exercise such option
unless the amount to be deposited in the Collection Account pursuant to the
preceding sentence is greater than or equal to the sum of the Outstanding Amount
of the Notes and the Certificate Balance and all accrued but unpaid interest
(including any overdue interest) thereon to and including the
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last day of the Collection Period immediately preceding the redemption date.
(b) Upon any sale of the assets of the Trust pursuant to Section 9.02 of
the Trust Agreement, the Servicer shall instruct the Indenture Trustee to
deposit the proceeds from such sale after all payments and reserves therefrom
have been made (the "Insolvency Proceeds") in the Collection Account. On the
Distribution Date on which the Insolvency Proceeds are deposited in the
Collection Account (or, if such proceeds are not so deposited on a Distribution
Date, on the Distribution Date immediately following such deposit), the Servicer
shall instruct the Indenture Trustee to make the following deposits (after the
application on such Distribution Date of the Total Distribution Amount and funds
on deposit in the Reserve Account pursuant to Sections 5.05 and 5.06) from the
Insolvency Proceeds and any funds remaining on deposit in the Reserve Account
(including the proceeds of any sale of investments therein as described in the
following sentence):
(i) to the Note Distribution Account, any portion of the Noteholders'
Interest Distributable Amount not otherwise deposited into the Note
Distribution Account on such Distribution Date;
(ii) to the Certificate Distribution Account, any portion of the
Certificateholders' Interest Distributable Amount not otherwise deposited
into the Certificate Distribution Account on such Distribution Date;
(iii) to the Note Distribution Account, the Outstanding Amount of the
Notes (after giving effect to the reduction in the Outstanding Amount of
the Notes to result from the deposits made in the Note Distribution Account
on such Distribution Date and on prior Distribution Dates); and
(iv) to the Certificate Distribution Account, the Certificate Balance
(after giving effect to the reduction in the Certificate Balance to result
from the deposits made in the Certificate Distribution Account on such
Distribution Date under prior Distribution Dates).
Any investments on deposit in the Reserve Account or Note Distribution Account
which will not mature on or before such Distribution Date shall be sold by the
Indenture Trustee at such time as will result in the Indenture Trustee receiving
the proceeds from such sale not later than the Payment Determination Date
preceding such Distribution Date. Any Insolvency Proceeds remaining after the
deposits described above shall be paid to the Depositor.
(c) As described in Article 9 of the Trust Agreement, notice of any
termination of the Trust shall be given by the
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Servicer to the Owner Trustee and the Indenture Trustee as soon as practicable
after the Servicer has received notice thereof.
(d) Following the satisfaction and discharge of the Indenture and the
payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders hereunder and
the Owner Trustee will succeed to the rights of, and assume the obligations of,
the Indenture Trustee pursuant to this Agreement.
ARTICLE X
Miscellaneous
SECTION 10.01. Amendment. This Agreement may be amended by the Depositor,
the Servicer and the Issuer, with the consent of the Indenture Trustee, but
without the consent of any of the Noteholders or the Certificateholders, to cure
any ambiguity, to correct or supplement any provisions in this Agreement or for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions in this Agreement or of modifying in any manner the rights
of the Noteholders or the Certificateholders; provided, however, that such
action shall not, as evidenced by an Opinion of Counsel delivered to the Owner
Trustee and the Indenture Trustee, adversely affect in any material respect the
interests of any Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the Depositor, the
Servicer and the Issuer, with the consent of the Indenture Trustee, the consent
of the Holders of Notes evidencing not less than a majority of the Outstanding
Amount of the Notes and the consent of the Holders (as defined in the Trust
Agreement) of outstanding Certificates evidencing not less than a majority of
the outstanding Certificate Balance, for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this Agreement
or of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that no such amendment shall (a) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Receivables or distributions that shall be required
to be made for the benefit of the Noteholders or the Certificateholders or (b)
reduce the aforesaid percentage of the Outstanding Amount of the Notes and the
Certificate Balance, the Holders of which are required to consent to any such
amendment, without the consent of the Holders of all the outstanding Notes and
the Holders (as defined in the Trust Agreement) of all the outstanding
Certificates.
Promptly after the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of
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the substance of such amendment or consent to each Certificateholder, the
Indenture Trustee and each Rating Agency.
It shall not be necessary for the consent of Certificateholders or
Noteholders pursuant to this Section to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the Owner
Trustee and the Indenture Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement and the Opinion of Counsel referred to in Section
10.02(i)(1). The Owner Trustee and the Indenture Trustee may, but shall not be
obligated to, enter into any such amendment which affects the Owner Trustee's or
the Indenture Trustee's, as applicable, own rights, duties or immunities under
this Agreement or otherwise. No amendment to this Agreement will have any effect
on the rights and obligations of the Backup Servicer hereunder unless the Backup
Servicer shall consent thereto in writing.
SECTION 10.02. Protection of Title to Trust. (a) The Depositor shall
execute and file such financing statements and cause to be executed and filed
such continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain and protect the interest of the
Issuer and of the Indenture Trustee in the Receivables and in the proceeds
thereof. The Depositor shall deliver (or cause to be delivered) to the Owner
Trustee and the Indenture Trustee file-stamped copies of, or filing receipts
for, any document filed as provided above, as soon as available following such
filing.
(b) Neither the Depositor nor the Servicer shall change its name, identity
or corporate structure in any manner that would, could or might make any
financing statement or continuation statement filed in accordance with paragraph
(a) above seriously misleading within the meaning of ss. 9-402(7) of the UCC,
unless it shall have given the Owner Trustee and the Indenture Trustee at least
five days' prior written notice thereof and shall have promptly filed
appropriate amendments to all previously filed financing statements or
continuation statements.
(c) Each of the Depositor and the Servicer shall have an obligation to give
the Owner Trustee and the Indenture Trustee at least 60 days' prior written
notice of any relocation of its principal executive office if, as a result of
such relocation, the applicable provisions of the UCC would require the filing
of any amendment of any previously filed financing or continuation statement or
of any new financing statement and shall promptly file any such amendment or new
financing statement. The Servicer
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shall at all times maintain each office from which it shall service Receivables,
and its principal executive office, within the United States of America.
(d) The Servicer shall maintain accounts and records as to each Receivable
accurately and in sufficient detail to permit (i) the reader thereof to know at
any time the status of such Receivable, including payments and recoveries made
and payments owing (and the nature of each) and (ii) reconciliation between
payments or recoveries on (or with respect to) each Receivable and the amounts
from time to time deposited in the Collection Account and the Payahead Account
in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Receivables, the Servicer's
master computer records (including any backup archives) that refer to a
Receivable shall indicate clearly the interest of the Issuer and the Indenture
Trustee in such Receivable and that such Receivable is owned by the Issuer and
has been pledged to the Indenture Trustee. Indication of the Issuer's and the
Indenture Trustee's interest in a Receivable shall be deleted from or modified
on the Servicer's computer systems when, and only when, the related Receivable
shall have been paid in full or repurchased.
(f) If at any time the Depositor or the Servicer shall propose to sell,
grant a security interest in, or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or printouts (including any restored from backup
archives) that, if they shall refer in any manner whatsoever to any Receivable,
shall indicate clearly that such Receivable has been sold and is owned by the
Issuer and has been pledged to the Indenture Trustee.
(g) The Servicer shall permit the Indenture Trustee, the Backup Servicer
and their agents at any time during normal business hours to inspect, audit and
make copies of and abstracts from the Servicer's records regarding any
Receivable.
(h) Upon request, the Servicer shall furnish to the Owner Trustee or to the
Indenture Trustee, within five Business Days, a list of all Receivables (by
contract number and name of Obligor) then held as part of the Trust, together
with a reconciliation of such list to the Schedule of Receivables and to each of
the Servicer's Certificates furnished before such request indicating removal of
Receivables from the Trust.
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(i) The Servicer shall deliver to the Owner Trustee and the Indenture
Trustee:
(1) promptly after the execution and delivery of this Agreement and of
each amendment hereto, an Opinion of Counsel stating that, in the opinion
of such counsel, either (A) all financing statements and continuation
statements have been executed and filed that are necessary fully to
preserve and protect the interest of the Owner Trustee and the Indenture
Trustee in the Receivables, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or
(B) no such action shall be necessary to preserve and protect such
interest; and
(2) within 90 days after the beginning of each calendar year beginning
with the first calendar year beginning more than three months after the
Closing Date, an Opinion of Counsel, dated as of a date during such 90-day
period, stating that, in the opinion of such counsel, either (A) all
financing statements and continuation statements have been executed and
filed that are necessary fully to preserve and protect the interest of the
Owner Trustee and the Indenture Trustee in the Receivables, and reciting
the details of such filings or referring to prior Opinions of Counsel in
which such details are given, or (B) no such action shall be necessary to
preserve and protect such interest.
Each Opinion of Counsel referred to in clause (1) or (2) above shall specify any
action necessary (as of the date of such opinion) to be taken in the following
year to preserve and protect such interest.
SECTION 10.03. Notices. All demands, notices, communications and
instructions upon or to the Depositor, the Servicer, the Owner Trustee, the
Indenture Trustee or each Rating Agency under this Agreement shall be in
writing, personally delivered or mailed by certified mail, return receipt
requested, and shall be deemed to have been duly given upon receipt (a) in the
case of the Depositor, to NAL Acceptance Corporation, 500 Cypress Creek Road
West, Suite 590, Fort Lauderdale, Florida 33309, Telephone: 954-958-3591; Fax:
954-938-8209, Attention: Dennis La Vigne, (b) in the case of the Servicer, to
NAL Acceptance Corporation, 500 Cypress Road West, Suite 590, Fort Lauderdale,
Florida 33309, (c) in the case of the Issuer or the Owner Trustee, at the
Corporate Trust Office (as defined in the Trust Agreement), (d) in the case of
the Indenture Trustee or Backup Servicer, at the Corporate Trust Office, (e) in
the case of the Rating Agencies, to Fitch Investors Service, L.P., One State
Street Plaza, New York, New York 10004 and Duff & Phelps Credit Rating Co., 55
E. Monroe Street, Chicago, Illinois 60603, Telephone: 312-263-2610, Fax:
312-263-2852, Attention: Asset-Backed Research and Monitoring; or, as to each
of the foregoing,
54
<PAGE>
at such other address as shall be designated by written notice to the other
parties.
SECTION 10.04. Assignment by the Depositor or the Servicer. Notwithstanding
anything to the contrary contained herein, except as provided in the remainder
of this Section, as provided in Sections 6.04 and 7.03 herein and as provided in
the provisions of this Agreement concerning the resignation of the Servicer,
this Agreement may not be assigned by the Depositor or the Servicer.
SECTION 10.05. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Depositor, the Servicer, the Backup
Servicer, the Issuer, the Owner Trustee, the Certificateholders, the Indenture
Trustee and the Noteholders, and nothing in this Agreement, whether express or
implied, shall be construed to give to any other Person any legal or equitable
right, remedy or claim in the Owner Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
SECTION 10.06. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 10.07. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 10.08. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 10.09. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 10.10. Assignment by Issuer. The Depositor and the Servicer hereby
acknowledge and consent to any mortgage, pledge, assignment and grant of a
security interest by the Issuer to the Indenture Trustee pursuant to the
Indenture for the benefit of the Noteholders of all right, title and interest of
the Issuer in, to and under the Receivables and the assignment of any or all
55
<PAGE>
of the Issuer's rights and obligations hereunder to the Indenture Trustee.
SECTION 10.11. Nonpetition Covenants. (a) Notwithstanding any prior
termination of this Agreement, the Servicer, the Backup Servicer and the
Depositor shall not, prior to the date which is one year and one day after the
termination of this Agreement with respect to the Issuer or the Depositor,
acquiesce, petition or otherwise invoke or cause the Issuer or the Depositor to
invoke the process of any court or government authority for the purpose of
commencing or sustaining a case against the Issuer or the Depositor under any
federal or state bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or the Depositor or any substantial part of its
property, or ordering the winding up or liquidation of the affairs of the Issuer
or the Depositor.
SECTION 10.12. Limitation of Liability of Owner Trustee and Indenture
Trustee. (a) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by Wilmington Trust Company not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall Wilmington Trust Company in its individual capacity or,
except as expressly provided in the Trust Agreement, as beneficial owner of the
Issuer have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer. For all purposes
of this Agreement, in the performance of its duties or obligations hereunder or
in the performance of any duties or obligations of the Issuer hereunder, the
Owner Trustee shall be subject to, and entitled to the benefits of, the terms
and provisions of Articles VI, VII and VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by Bankers Trust Company, not in its individual
capacity but solely as Indenture Trustee and in no event shall Bankers Trust
Company have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
56
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
NAL AUTO TRUST 1996-3
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but solely
as Owner Trustee on behalf of the
Trust
By:_____________________________________
Name: Emmett R. Harmon
Title: Vice President
AUTORICS II, Inc.,
Depositor
By:_____________________________________
Name: Dennis R. La Vigne
Title: Vice President and Treasurer
NAL ACCEPTANCE CORPORATION, Servicer
By:_____________________________________
Name: Dennis R. La Vigne
Title: Vice President and Treasurer
BANKERS TRUST COMPANY, Backup
Servicer
By:_____________________________________
Name:
Title:
Acknowledged and accepted as of the day and year
first above written:
BANKERS TRUST COMPANY,
not in its individual capacity
but solely as Indenture Trustee
By:_________________________________________________
Name:
Title:
<PAGE>
SCHEDULE A
Schedule of Receivables
<PAGE>
EXHIBIT A
NAL Acceptance Corporation
NAL Auto Trust 1996-3 Distribution Date Statement to Noteholders
________________________________________________________________________________
Principal Distribution Amount
($ per $1,000 original principal amount)
Interest Distribution Amount
($ per $1,000 original principal amount)
Pool Balance
Note Balance
Note Pool Factor
Certificate Balance
Servicing Fee
Servicing Fee Per $1,000 original principal amount
Realized Losses
Noteholders' Interest Carryover Shortfall per $1,000 original
principal amount
Noteholders' Principal Carryover Shortfall per $1,000 original
principal amount
Purchase Amounts
Reserve Account Balance
Payahead Balance
Average Three Month Delinquency Ratio
Average Six Month Realized Loss Ratio
Average Six Month Repossession Ratio
Delinquency Trigger Event [YES] [NO]
Repossession Trigger Event [YES] [NO]
Loss Trigger Event [YES] [NO]
Delinquent Receivables
30 days
60 days
90 days
A-1
<PAGE>
EXHIBIT B
NAL Acceptance Corporation
NAL Auto Trust 1996-3 Distribution Date Statement to
Certificateholders
______________________________________________________________________________
Principal Distribution Amount
Principal Per $1,000 Initial Certificate Balance
Interest Distribution Amount
Interest Per $1,000 Initial Certificate Balance
Pool Balance
Note Balance
Note Pool Factor
Certificate Balance
Certificate Pool Factor
Servicing Fee
Servicing Fee Per $1,000 Initial Certificate Balance
Realized Losses
Noteholders' Interest Carryover Shortfall per $1,000 original
Note principal amount
Noteholders' Principal Carryover Shortfall per $1,000 original
Note principal amount
Certificateholders' Interest Carryover Shortfall per $1,000
Initial Certificate Balance
Certificateholders' Principal Carryover Shortfall per $1,000
Initial Certificate Balance
Purchase Amounts
Reserve Account Balance
Payahead Balance
Average Three Month Delinquency Ratio
Average Six Month Realized Loss Ratio
Average Six Month Repossession Ratio
Delinquency Trigger Event [YES] [NO]
Repossession Trigger Event [YES] [NO]
Loss Trigger Event [YES] [NO]
B-1
<PAGE>
Delinquent Receivables
30 days
60 days
90 days
______________________________________________________________________________
B-2
<PAGE>
EXHIBIT C
Form of Servicer's Certificate
NAL Acceptance Corporation
NAL Auto Trust 1996-3 Monthly Servicer's Certificate(1)
[___________, 199__]
Dates Covered: From & Incl. _____ To & Incl. _______
I. Collections
Principal Payments Received...........................................$
Interest Payments Received............................................$
Liquidation Proceeds..................................................$
Recoveries on Previously Liquidated Receivables.......................$
Aggregate Purchase Amount for Purchased Receivables...................$
Amount Attributable to Interest.................................$
Amount Attributable to Principal................................$
Investment Earnings...................................................$
Total Collections.....................................................$
II. Distributions*
Total Required Principal Reduction of the Securities
Principal Distribution Amount
Notes ($_________ per $1,000 original principal amount)
Certificates ($____ per $1,000 original principal
amount)
Interest Distribution Amount
Notes ($_________ per $1,000 original principal amount)
Certificates ($_________ per $1,000 original principal
amount)
Total Distributable Amount
Notes ($_________ per $1,000 original principal amount)
Certificates ($_________ per $1,000 original principal
amount)
- ----------
(1) Items that are marked with an * will be delivered quarterly.
C-1
<PAGE>
Additional Required Distributions
Servicing Fee.........................................$
Deposit to the Reserve Account........................$
Reserve Account
Withdrawals for this Distribution Date................$
Cumulative Withdrawals................................$
III. Payahead Account Information
Beginning Period Balance..............................$
Amounts Deposited into Payahead Account...............$
Amounts Withdrawn from Payahead Account...............$
Ending Balance........................................$
IV. Pool Balance and Portfolio Information
Beginning End
of Period of Period
Pool Balance.................... $ $
Note Balance*................... $ $
Note Pool Factor* ..............
Certificate Balance*............ $ $
Certificate Pool Factor*........
Remaining Number of Receivables
Weighted Average A/R............
Weighted Average Remaining Term
V. Reconciliation of the Reserve Account
Beginning Balance.....................................$
Withdrawals from Reserve Account......................$
Amounts Available for Deposit
to Reserve Account.................................$
Specified Reserve Account Balance.....................$
Amounts Deposited to Reserve Account..................$
Ending Balance........................................$
VI. Loss and Delinquency Report Activity
Realized Losses for Collection Period.................$
Liquidated Receivables
Aggregate Principal Balance.....................$
Liquidation Proceeds............................$
Recoveries on Previously
Liquidated Receivables........................$
Cumulative Realized Losses......................$
Delinquency
30-59 days
Principal Amount................................$
Number of Receivables...........................
C-2
<PAGE>
60-89 days
Principal Amount................................$
Number of Receivables...........................
90 days or more
Principal Amount................................$
Number of Receivables...........................
Total Amount
Principal Amount................................$
Number of Receivables...........................
VII. Original Deal Parameter Inputs
Aggregate Principal Balance of the
Receivables as of the Cutoff Date.........................$
Weighted Average APR of the Receivables
as of the Cutoff Date..................................... %
Weighted Average Remaining Term of the
Receivables as of the Cutoff Date......................... months
Number of Receivables.......................................
Initial Reserve Account Balance.............................$
C-3
<PAGE>
EXHIBIT D
---------
NAL ACCEPTANCE CORPORATION
CREDIT FILE CONTENTS
LOAN AND LEASE
(RIGHT SIDE OF FILE)
RISK
NAME:___________________ CODE:__________________ ACCOUNT #:______________
================================================================================
(X) (X)
UNDER EXCEPTIONS INT DOCUMENTATION AUDIT COMMENTS
- --------------------------------------------------------------------------------
Application
- --------------------------------------------------------------------------------
Credit Report
- --------------------------------------------------------------------------------
Explanation
Derogatory Credit
- --------------------------------------------------------------------------------
Credit Decision Notification
- --------------------------------------------------------------------------------
Investigation Work
A) Home Address Verified
B) Employment Verified
- --------------------------------------------------------------------------------
1040's/W-2/Paystubs
- --------------------------------------------------------------------------------
Current Telephone Bill in
Applicant's Name and Address
- --------------------------------------------------------------------------------
Reference Sheet (5 included)
- --------------------------------------------------------------------------------
Other Stips - Specify
- --------------------------------------------------------------------------------
Insurance Confirmation
by NAL Insurance Dept.
- --------------------------------------------------------------------------------
Loan/Lease Worksheet
- --------------------------------------------------------------------------------
Copy of Funding Check
- --------------------------------------------------------------------------------
Collections/Other
Correspondence
- --------------------------------------------------------------------------------
Approved Dealer
- --------------------------------------------------------------------------------
GE Approval
================================================================================
______________________________ ___________________________________
Signature - Funder Date
______________________________ ___________________________________
Signature - Auditor Date
D-1
<PAGE>
NAL ACCEPTANCE CORPORATION
CREDIT FILE CONTENTS
LOAN AND LEASE
(LEFT SIDE OF FILE)
NAME:__________________ CODE:______________ ACCOUNT #:______________
================================================================================
(X) (X)
UNDER EXCEPTIONS INT DOCUMENTATION AUDIT COMMENTS
- --------------------------------------------------------------------------------
Contract:
A) Trade-In/Down Payment
B) Note Rate
C) Term
D) Monthly Payment
E) Add's Approved
F) Dealer Advance Per Approval
- --------------------------------------------------------------------------------
Original Assignment
- --------------------------------------------------------------------------------
Copy of Application for
Certificate of Title
- --------------------------------------------------------------------------------
Certificate of Origin (MSO)(New)
Copy of Title (Used)
- --------------------------------------------------------------------------------
Lien Guarantee/
Lien Registration
- --------------------------------------------------------------------------------
Bill of Sale /
Buyer's Order Signed
- --------------------------------------------------------------------------------
Manufacturers Invoice (New)
- --------------------------------------------------------------------------------
Copy Black Book /
NADA Valuation
- --------------------------------------------------------------------------------
Odometer Statement (Used)
- --------------------------------------------------------------------------------
Photocopy of Driver's License
- --------------------------------------------------------------------------------
Add's Documentation
- --------------------------------------------------------------------------------
Notice to Cosigner
- --------------------------------------------------------------------------------
Signed Disclosure Form for
A & H Insurance (if applicable)
- --------------------------------------------------------------------------------
Customer Phone Interview
Correspondence
================================================================================
______________________________ ___________________________________
Signature - Funder Date
______________________________ ___________________________________
Signature - Auditor Date
D-2
<PAGE>
EXHIBIT E
Form of Assignment
Reference is made to the Sale and Servicing Agreement dated as of
September 11, 1996 (the "Sale and Servicing Agreement") among NAL Auto Trust
1996-3, Autorics II, Inc. ("Autorics II"), NAL Acceptance Corporation ("NAL")
and Bankers Trust Company. All capitalized terms used herein without definition
shall have the respective meanings specified in the Sale and Servicing
Agreement.
[NAL] [Autorics, Inc.] [Autorics II] hereby assigns to ____________, for
which the Custodian is acting as custodian and bailee under the terms of the
Custodial Agreement all right, title and interest of [NAL] [Autorics, Inc.]
[Autorics II] in and to (but none of [NAL] [Autorics, Inc.] [Autorics II]'s
obligations with respect to):
(1) the Receivables and all moneys received thereon on and after the Cutoff
Date plus all Payaheads as of the Cutoff Date;
(2) the security interests in the Financed Vehicles granted by Obligors
pursuant to the Receivables, any other right to realize upon property securing a
Receivable and any other interest of [NAL] [Autorics, Inc.] [Autorics II] in
such Financed Vehicles including [NAL] [Autorics, Inc.] [Autorics II]'s right,
title and interest in the lien on the Financed Vehicles in the name of the
Depositor's agent, Autorics, Inc., NAL or SFI;
(3) any proceeds with respect to the Receivables from claims on any
Insurance Policies relating to Financed Vehicles or Obligors;
(4) proceeds of any recourse (but none of the obligations) to Dealers on
Receivables;
(5) any Financed Vehicle that shall have secured a Receivable and shall
have been acquired by or on behalf of the Seller, the Depositor, the Servicer,
or the Trust;
(6) the Receivables Files;
(7) all right, title and interest of [Autorics, Inc.] [Autorics II] under
the Receivables Purchase Agreement, including, without limitation, the right of
[Autorics, Inc.] [Autorics II] to cause NAL to purchase Receivables under
certain circumstances;
E-1
<PAGE>
(8) the Trust Accounts; and
(9) the proceeds of any and all of the foregoing.
[NAL] [AUTORICS, INC.]
[AUTORICS II, INC.]
By:_________________________________
Name:
Title:
E-2
EXECUTION COPY
================================================================================
INDENTURE
between
NAL AUTO TRUST 1996-3,
as Issuer
and
BANKERS TRUST COMPANY,
as Indenture Trustee
Dated as of September 11, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions........................................... 2
SECTION 1.02. Rules of Construction................................. 9
ARTICLE II
The Notes
SECTION 2.01. Form.................................................. 9
SECTION 2.02. Execution, Authentication and Delivery................ 9
SECTION 2.03. Temporary Notes....................................... 10
SECTION 2.04. Limitations on Transfer of the Notes.................. 10
SECTION 2.05. Registration; Registration of Transfer
and Exchange..................................... 13
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen
Notes............................................ 15
SECTION 2.07. Persons Deemed Owner.................................. 16
SECTION 2.08. Payment of Principal and Interest;
Defaulted Interest............................... 16
SECTION 2.09. Cancellation.......................................... 17
SECTION 2.10. Tax Treatment......................................... 18
ARTICLE III
Covenants
SECTION 3.01. Payment of Principal and Interest..................... 18
SECTION 3.02. Maintenance of Office or Agency....................... 18
SECTION 3.03. Money for Payments To Be Held in Trust................ 19
SECTION 3.04. Existence............................................. 20
SECTION 3.05. Protection of Trust Estate............................ 21
SECTION 3.06. Opinions as to Trust Estate........................... 21
SECTION 3.07. Performance of Obligations; Servicing of
Receivables...................................... 22
SECTION 3.08. Negative Covenants.................................... 24
SECTION 3.09. Annual Statement as to Compliance..................... 24
SECTION 3.10. Issuer May Consolidate, etc., Only on
Certain Terms.................................... 25
SECTION 3.11. Successor or Transferee............................... 26
SECTION 3.12. No Other Business..................................... 27
SECTION 3.13. No Borrowing.......................................... 27
SECTION 3.14. Servicer's Obligations................................ 27
SECTION 3.15. Guarantees, Loans, Advances and Other
Liabilities...................................... 27
SECTION 3.16. Capital Expenditures.................................. 27
SECTION 3.17. Removal of Administrator.............................. 27
SECTION 3.18. Restricted Payments................................... 27
SECTION 3.19. Notice of Events of Default........................... 28
SECTION 3.20. Further Instruments and Acts.......................... 28
i
<PAGE>
ARTICLE IV
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of Indenture............... 28
SECTION 4.02. Application of Trust Money............................ 29
SECTION 4.03. Repayment of Moneys Held by Paying
Agent............................................ 29
ARTICLE V
Remedies
SECTION 5.01. Events of Default..................................... 30
SECTION 5.02. Acceleration of Maturity; Rescission and
Annulment........................................ 31
SECTION 5.03. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee................. 32
SECTION 5.04. Remedies; Priorities.................................. 34
SECTION 5.05. Optional Preservation of the
Receivables...................................... 35
SECTION 5.06. Limitation of Suits................................... 36
SECTION 5.07. Unconditional Rights of Noteholders To
Receive Principal and Interest................... 36
SECTION 5.08. Restoration of Rights and Remedies.................... 37
SECTION 5.09. Rights and Remedies Cumulative........................ 37
SECTION 5.10. Delay or Omission Not a Waiver........................ 37
SECTION 5.11. Control by Noteholders................................ 37
SECTION 5.12. Waiver of Past Defaults............................... 38
SECTION 5.13. Undertaking for Costs................................. 38
SECTION 5.14. Waiver of Stay or Extension Laws...................... 39
SECTION 5.15. Action on Notes....................................... 39
SECTION 5.16. Performance and Enforcement of Certain
Obligations...................................... 39
ARTICLE VI
The Indenture Trustee
SECTION 6.01. Duties of Indenture Trustee........................... 40
SECTION 6.02. Rights of Indenture Trustee........................... 41
SECTION 6.03. Individual Rights of Indenture Trustee................ 42
SECTION 6.04. Indenture Trustee's Disclaimer........................ 42
SECTION 6.05. Notice of Defaults.................................... 42
SECTION 6.06. Reports by Indenture Trustee to Holders............... 42
SECTION 6.07. Compensation and Indemnity............................ 43
SECTION 6.08. Replacement of Indenture Trustee...................... 43
SECTION 6.09. Successor Indenture Trustee by Merger................. 44
SECTION 6.10. Appointment of Co-Indenture Trustee or
Separate Indenture Trustee....................... 45
SECTION 6.11. Eligibility; Disqualification......................... 46
ii
<PAGE>
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.01. Issuer To Furnish Indenture Trustee
Names and Addresses of Noteholders............... 47
SECTION 7.02. Preservation of Information;
Communications to Noteholders.................... 47
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. Collection of Money................................... 47
SECTION 8.02. Trust Accounts........................................ 48
SECTION 8.03. General Provisions Regarding Accounts................. 48
SECTION 8.04. Release of Trust Estate............................... 49
SECTION 8.05. Opinion of Counsel.................................... 49
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent
of Noteholders....................................50
SECTION 9.02. Supplemental Indentures with Consent of
Noteholders...................................... 51
SECTION 9.03. Execution of Supplemental Indentures.................. 53
SECTION 9.04. Effect of Supplemental Indenture...................... 53
SECTION 9.05. Reference in Notes to Supplemental
Indentures....................................... 53
ARTICLE X
Redemption of Notes
SECTION 10.01. Redemption........................................... 54
SECTION 10.02. Form of Redemption Notice............................ 54
SECTION 10.03. Notes Payable on Redemption Date..................... 55
ARTICLE XI
Miscellaneous
SECTION 11.01. Compliance Certificates and Opinions,
etc............................................. 55
SECTION 11.02. Form of Documents Delivered to
Indenture Trustee............................... 56
SECTION 11.03. Acts of Noteholders.................................. 56
SECTION 11.04. Notices, etc., to Indenture Trustee,
Issuer and Rating Agencies...................... 57
SECTION 11.05. Notices to Noteholders; Waiver....................... 58
SECTION 11.06. Alternate Payment and Notice
Provisions...................................... 58
SECTION 11.07. [Reserved]........................................... 59
iii
<PAGE>
SECTION 11.08. Effect of Headings and Table of
Contents........................................ 59
SECTION 11.09. Successors and Assigns............................... 59
SECTION 11.10. Separability......................................... 59
SECTION 11.11. Benefits of Indenture................................ 59
SECTION 11.12. Legal Holidays....................................... 59
SECTION 11.13. Governing Law........................................ 59
SECTION 11.14. Counterparts......................................... 59
SECTION 11.15. Recording of Indenture............................... 59
SECTION 11.16. Trust Obligation..................................... 60
SECTION 11.17. No Petition.......................................... 60
SECTION 11.18. Inspection........................................... 60
SCHEDULE I Schedule of Receivables
EXHIBIT A Form of Note
EXHIBIT B [Reserved]
EXHIBIT C Form of Transferor Certificate
EXHIBIT D Form of Investment Letter
EXHIBIT E Form of Depository Agreement
iv
<PAGE>
INDENTURE dated as of September 11, 1996, between NAL AUTO TRUST 1996-3, a
Delaware business trust (the "Issuer"), and BANKERS TRUST COMPANY, a New York
banking corporation, solely as trustee and not in its individual capacity (the
"Indenture Trustee").
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the Holders of the Issuer's 7.30% Asset Backed
Notes (the "Notes"):
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the Closing Date, as
Indenture Trustee for the benefit of the Holders of the Notes, all of the
Issuer's right, title and interest in and to (but none of the obligations with
respect to) (a) the Receivables and all moneys received thereon on and after the
Cutoff Date plus all Payaheads as of the Cutoff Date; (b) the security interests
in the Financed Vehicles granted by Obligors pursuant to the Receivables, any
other right to realize upon property securing a Receivable, and any other
interest of the Issuer in such Financed Vehicles including the Issuer's right,
title and interest in the lien on the Financed Vehicles held in the name of the
Depositor's agents, Autorics, Inc., NAL or SFI; (c) any proceeds with respect to
the Receivables from claims on any Insurance Policies relating to Financed
Vehicles or Obligors; (d) proceeds of any recourse (but none of the obligations)
to Dealers on Receivables; (e) any Financed Vehicle that shall have secured a
Receivable and that shall have been acquired by or on behalf of the Seller, the
Depositor, the Servicer, or the Issuer; (f) the Receivables Files; (g) the Trust
Accounts; (h) the Sale and Servicing Agreement and the Receivables Purchase
Agreement, including the right of the Issuer to cause NAL to purchase
Receivables under certain circumstances; and (i) all present and future claims,
demands, causes of action and choses in action in respect of any or all of the
foregoing, and all payments on or under and all proceeds of every kind and
nature whatsoever in respect of any or all of the foregoing, including all
proceeds of the conversion thereof, voluntary or involuntary, into cash or other
liquid property, all cash proceeds, accounts, accounts receivable, notes,
drafts, acceptances, chattel paper, checks, deposit accounts, insurance
proceeds, condemnation awards, rights to payment of any and every kind, and
other forms of obligations, and receivables, instruments and other property that
at any time constitute all or part of, or are included in the proceeds of, any
of the foregoing (collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of principal of
and interest on, and any other amounts owing in respect of, the Notes, equally
and ratably without prejudice, priority or distinction, and to secure compliance
with the provisions of this Indenture, all as provided in this Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the Holders of the
Notes, acknowledges such Grant, accepts the trusts
<PAGE>
under this Indenture in accordance with the provisions of this Indenture and
agrees to perform its duties required in this Indenture to the best of its
ability to the end that the interests of the Holders of the Notes may be
adequately and effectively protected.
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions. (a) Except as otherwise specified herein or as
the context may otherwise require, the following terms have the respective
meanings set forth below for all purposes of this Indenture.
"Act" has the meaning specified in Section 11.03(a).
"Account Agreement" means the Account Agreement, dated September 27, 1996
by and between SunTrust Bank, South Florida, National Association and Servicer,
with the Issuer and the Indenture Trustee as third party beneficiaries.
"Administration Agreement" means the Administration Agreement dated as of
September 11, 1996, among the Administrator, the Issuer and the Indenture
Trustee.
"Administrator" means NAL Acceptance Corporation, a Florida corporation, or
any successor Administrator under the Administration Agreement.
"Affiliate" means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Authorized Officer" means, with respect to the Issuer, any officer of the
Owner Trustee who is authorized to act for the Owner Trustee in matters relating
to the Issuer and who is identified on the list of Authorized Officers delivered
by the Owner Trustee to the Indenture Trustee on the Closing Date (as such list
may be modified or supplemented from time to time thereafter) and, so long as
the Administration Agreement is in effect, any Vice President or more senior
officer of the Administrator who is authorized to act for the Administrator in
matters relating to the Issuer and to be acted upon by the Administrator
pursuant to the Administration Agreement and who is identified on the list of
Authorized Officers delivered by the Administrator to the Indenture Trustee on
the Closing Date (as such list may be modified or supplemented from time to time
thereafter).
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"AUTORICS II" means AUTORICS II, Inc., a Delaware corporation, and any
successor in interest.
"Basic Documents" means the Certificate of Trust, the Trust Agreement, the
Sale and Servicing Agreement, the Receivables Purchase Agreement, the
Administration Agreement, and other documents and certificates delivered in
connection therewith.
"Book-Entry Note" means the Note that (i) evidences all or part of the
Notes, (ii) the beneficial ownership of which is evidenced by book entries on
the ledger or accounts of the Depository where such Note is held and (iii) bears
the legend set forth in Exhibit A.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which banking institutions or trust companies in the cities of New York, New
York, Wilmington, Delaware or Ft. Lauderdale, Florida are authorized or
obligated by law, regulation or executive order to remain closed.
"Certificate of Trust" means the certificate of trust of the Issuer
substantially in the form of Exhibit B to the Trust Agreement.
"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
"Closing Date" means September 27, 1996.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
"Collateral" has the meaning specified in the Granting Clause
of this Indenture.
"Corporate Trust Office" means the principal office of the Indenture
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of execution of this Agreement is located
at Four Albany Street, New York, New York 10006; Attention: Corporate Trust and
Agency Group, Structured Finance Team, or at such other address as the Indenture
Trustee may designate from time to time by notice to the Noteholders and the
Issuer, or the principal corporate trust office of any successor Indenture
Trustee at the address designated by such successor Indenture Trustee by notice
to the Noteholders and the Issuer.
"Default" means any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.
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"Depositor" means AUTORICS II, Inc., a Delaware corporation, and any
successor in interest.
"Depository Agreement" means the agreement dated September 27, 1996, among
the Issuer, the Trustee, and The Depository Trust Company, as the initial
Clearing Agency, substantially in the form of Exhibit E.
"Event of Default" has the meaning specified in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Executive Officer" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, the Secretary, or the Treasurer of
such corporation; and with respect to any partnership, any general partner
thereof.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, create, and grant a lien upon and a security
interest in and a right of set-off against, deposit, set over, and confirm
pursuant to this Indenture. A Grant of the Collateral or of any other agreement
or instrument shall include all rights, powers and options (but none of the
obligations) of the granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other moneys payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
Proceedings in the name of the granting party or otherwise, and generally to do
and receive anything that the granting party is or may be entitled to do or
receive thereunder or with respect thereto.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Note Register.
"Indenture Trustee" means Bankers Trust Company, a New York banking
corporation, solely as trustee under this Indenture and not in its individual
capacity, or any successor Indenture Trustee under this Indenture.
"Independent" means, when used with respect to any specified Person, that
the Person (a) is in fact independent of the Issuer, any other obligor on the
Notes, the Depositor and any Affiliate of any of the foregoing Persons, (b) does
not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Depositor or any Affiliate
of any of the foregoing Persons and (c) is not connected with the Issuer, any
such other obligor, the Depositor or any Affiliate of any of the foregoing
Persons as an officer, employee, promoter, underwriter, trustee, partner,
director, or person performing similar functions.
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"Independent Certificate" means a certificate or opinion to be delivered to
the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, made by an
Independent appraiser or other expert appointed by an Issuer Order and approved
by the Indenture Trustee in the exercise of reasonable care, and such opinion or
certificate shall state that the signer has read the definition of "Independent"
in this Indenture and that the signer is Independent within the meaning thereof.
"Issuer" means NAL Auto Trust 1996-3 until a successor replaces it and,
thereafter, means the successor and, for purposes of any provision contained
herein, each other obligor on the Notes.
"Issuer Order" or "Issuer Request" means a written order or request signed
in the name of the Issuer by any one of its Authorized Officers and delivered to
the Indenture Trustee.
"NAL" means NAL Acceptance Corporation, a Florida corporation, and any
successor in interest.
"Note Owner" means, with respect to any Note held in book-entry form, the
Person who is the beneficial owner of such Note, as reflected on the books of
the Clearing Agency (directly as a Clearing Agency participant or as an indirect
participant, in each case in accordance with the rules of such Clearing Agency.
"Note Rate" means 7.30% per annum (computed on the basis of a 360-day year
consisting of twelve 30-day months).
"Note Register" and "Note Registrar" have the respective meanings specified
in Section 2.05.
"Notes" means the 7.30% Asset Backed Notes, substantially in the form of
Exhibit A.
"Officer's Certificate" means a certificate signed by any Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, and delivered to
the Indenture Trustee. Unless otherwise specified, any reference in this
Indenture to an Officer's Certificate shall be to an Officer's Certificate of
any Authorized Officer of the Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who may,
except as otherwise expressly provided in this Indenture, be an employee of or
counsel to the Issuer and who shall be satisfactory to the Indenture Trustee,
which opinion or opinions shall be addressed to the Indenture Trustee as
Indenture Trustee, shall comply with any applicable requirements of Section
11.01 and shall be in form and substance satisfactory to the Indenture Trustee.
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"Outstanding" means, as of the date of determination, all Notes theretofore
authenticated and delivered under this Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or delivered to
the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Indenture Trustee
or any Paying Agent in trust for the Holders of such Notes (provided,
however, that if such Notes are to be redeemed, notice of such redemption
has been duly given pursuant to this Indenture or provision for such notice
has been made, satisfactory to the Indenture Trustee); and
(iii) Notes in exchange for or in lieu of which other Notes have been
authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes are
held by a bona fide purchaser;
provided, that in determining whether the Holders of the requisite Outstanding
Amount of the Notes have given any request, demand, authorization, direction,
notice, consent or waiver hereunder or under any Basic Document, Notes owned by
the Issuer, any other obligor upon the Notes, the Depositor or any Affiliate of
any of the foregoing Persons shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Indenture Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent, or waiver, only Notes that a Responsible Officer of the
Indenture Trustee actually knows to be so owned shall be so disregarded. Notes
so owned that have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Indenture Trustee the
pledgee's right so to act with respect to such Notes and that the pledgee is not
the Issuer, any other obligor upon the Notes, the Depositor or any Affiliate of
any of the foregoing Persons.
"Outstanding Amount" means the aggregate principal amount of all Notes
Outstanding at the date of determination.
"Owner Trustee" means Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, or any successor
Owner Trustee under the Trust Agreement.
"Paying Agent" means the Indenture Trustee or any other Person that meets
the eligibility standards for the Indenture Trustee specified in Section 6.11
and is authorized by the Issuer to make payments to and distributions from the
Collection Account and the Note Distribution Account, including payments of
principal of or interest on the Notes on behalf of the Issuer.
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"Payment Date" means a Distribution Date.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization, or government or any agency or political
subdivision thereof.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.06 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other judicial or
administrative proceeding.
"Rating Agency Condition" means, with respect to any action, that the
Rating Agency shall have been given 10 days (or such shorter period as is
acceptable to the Rating Agency) prior notice thereof and that the Rating Agency
shall have notified the Depositor, the Servicer and the Issuer in writing that
such action will not result in a reduction or withdrawal of the then current
rating of the Notes.
"Receivables Purchase Agreement" means the Receivables Purchase Agreement
dated as of September 11, 1996, among Autorics, Inc., as seller, NAL, and
Autorics II, as purchaser.
"Record Date" means, with respect to a Distribution Date or Redemption
Date, the close of business on the last day of the preceding month.
"Redemption Date" means in the case of a redemption of the Notes pursuant
to Section 10.01(a) or a payment to Noteholders pursuant to Section 10.01(b),
the Distribution Date specified by the Servicer or the Issuer pursuant to
Section 10.01(a) or (b), as applicable.
"Redemption Price" means in the case of a redemption of the Notes pursuant
to Section 10.01(a), an amount equal to the unpaid principal amount of the Notes
redeemed plus accrued and unpaid interest thereon to and including the last day
of the month preceding the month of such Redemption Date at the Note Rate or (b)
in the case of a payment made to Noteholders pursuant to Section 10.01(b), the
amount on deposit in the Note Distribution Account, but not in excess of the
amount specified in clause (a) above.
"Registered Holder" means the Person in whose name a Note is registered on
the Note Register on the applicable Record Date.
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"Responsible Officer" means, with respect to the Indenture Trustee, any
officer within the Corporate Trust Office of the Indenture Trustee, including
any Vice President, Assistant Vice President, Assistant Treasurer, Assistant
Secretary, Managing Director or any other officer of the Indenture Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's knowledge of
and familiarity with the particular subject.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement dated
as of September 11, 1996, among the Issuer, AUTORICS II, the Back-up Servicer
and NAL.
"Schedule of Receivables" means the list of the Receivables set forth in
Schedule I (which Schedule may be in the form of microfiche).
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" means AUTORICS, Inc., in its capacity as seller under the
Receivables Purchase Agreement, and its successor in interest.
"Servicer" means NAL in its capacity as servicer under the Sale and
Servicing Agreement, and any Successor Servicer thereunder.
"State" means any one of the 50 States of the United States of America or
the District of Columbia.
"Successor Servicer" has the meaning specified in Section 3.07(e).
"TIA" means the Trust Indenture Act of 1939, as amended.
"Trust Estate" means all money, instruments, chattel paper, general
intangibles, rights and other property that are subject or intended to be
subject to the lien and security interest of this Indenture for the benefit of
the Noteholders (including, without limitation, all property and interests
Granted to the Indenture Trustee), including all proceeds thereof.
"UCC" means, unless the context otherwise requires, the Uniform Commercial
Code, as in effect in the relevant jurisdiction, as amended from time to time.
(b) Except as otherwise specified herein or as the context may otherwise
require, capitalized terms used but not otherwise defined herein have the
respective meanings set forth in the Sale and Servicing Agreement for all
purposes of this Indenture.
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SECTION 1.02. Rules of Construction. Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles as in
effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the plural
include the singular; and
(vi) any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or
instruments) references to all attachments thereto and instruments
incorporated therein; references to a Person are also to its permitted
successors and assigns.
ARTICLE II
The Notes
SECTION 2.01. Form. The Notes, together with the Indenture Trustee's
certificate of authentication, shall be in substantially the form set forth in
Exhibit A, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution of the Notes. Any
portion of the text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note.
Each Note shall be dated the date of its authentication. The terms of the
Notes set forth in Exhibit A are part of the terms of this Indenture.
SECTION 2.02. Execution, Authentication and Delivery. The Notes shall be
executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were at
any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such
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individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Notes.
The Indenture Trustee shall upon its receipt of an Issuer Order
authenticate and deliver Notes for original issue in an aggregate principal
amount of $63,047,000.
Each Note shall be dated the date of its authentication. The Notes shall be
issuable as registered Notes in the minimum denomination of $100,000 and in
integral multiples of $1,000 in excess thereof.
No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Note a certificate
of authentication substantially in the form provided for herein executed by the
Indenture Trustee by the manual signature of one of its authorized signatories,
and such certificate upon any Note shall be conclusive evidence, and the only
evidence, that such Note has been duly authenticated and delivered hereunder.
SECTION 2.03. Temporary Notes. Pending the preparation of definitive Notes,
the Issuer may execute, and upon receipt of an Issuer Order the Indenture
Trustee shall authenticate and deliver, temporary Notes that are printed,
lithographed, typewritten, mimeographed, or otherwise produced, of the tenor of
the definitive Notes in lieu of which they are issued and with such variations
not inconsistent with the terms of this Indenture as the officers executing such
Notes may determine, as evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuer shall cause definitive Notes to
be prepared without unreasonable delay. After the preparation of definitive
Notes, the temporary Notes shall be exchangeable for definitive Notes upon
surrender of the temporary Notes at the office or agency of the Issuer to be
maintained as provided in Section 3.02, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes, the Issuer shall
execute, and the Indenture Trustee shall authenticate and deliver in exchange
therefor, a like principal amount of definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as definitive Notes.
SECTION 2.04. Limitations on Transfer of the Notes. The Notes have not been
and will not be registered under the Securities Act and will not be listed on
any exchange. No transfer of a Note shall be made unless such transfer is made
pursuant to an effective registration statement under the Securities Act and any
applicable state securities laws or is exempt from the registration requirements
under said Act and such state securities laws. In the event that a transfer is
to be made in reliance upon an exemption from the Securities Act and state
securities laws, in order to assure compliance with the
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Securities Act and such laws, the Holder desiring to effect such transfer and
such Holder's prospective transferee shall each certify to the Indenture Trustee
and the Issuer in writing the facts surrounding the transfer in substantially
the forms set forth in Exhibit C (the "Transferor Certificate") and Exhibit D
(the "Investment Letter"). Except in the case of a transfer as to which the
proposed transferee has confirmed that it is a "qualified institutional buyer"
as provided in Section 2(b) of the Investment Letter, there shall also be
delivered to the Indenture Trustee an opinion of counsel that such transfer may
be made pursuant to an exemption from the Securities Act and state securities
laws, which opinion of counsel shall not be an expense of the Trust, the Owner
Trustee or the Indenture Trustee (unless it is the transferee from whom such
opinion is to be obtained) or of the Depositor or NAL; provided that such
opinion of counsel in respect of the applicable state securities laws may be a
memorandum of law rather than an opinion if such counsel is not licensed in the
applicable jurisdiction. The Depositor shall cause the Servicer to provide to
any Holder of a Note and any prospective transferee designated by any such
Holder information regarding the Notes and the Receivables and such other
information as shall be necessary to satisfy the condition to eligibility set
forth in Rule 144A(d)(4) for transfer of any such Note without registration
thereof under the Securities Act pursuant to the registration exemption provided
by Rule 144A. Each Holder of a Note desiring to effect such a transfer shall,
and does hereby agree to, indemnify the Issuer, the Owner Trustee, the Indenture
Trustee and the Depositor against any liability that may result if the transfer
is not so exempt or is not made in accordance with federal and state securities
laws.
If an election is made to hold a Note in book-entry form, the Note shall be
registered in the name of a nominee designated by the Clearing Agency (and may
be aggregated as to denominations with other Notes held by the Clearing Agency).
With respect to Notes held in book-entry form:
(i) the Note Registrar and the Trustee will be entitled to deal with
the Clearing Agency for all purposes of this Indenture (including the
payment of principal of and interest on the Notes and the giving of
instructions or directions hereunder) as the sole holder of the Notes, and
shall have no obligation to the Note Owners;
(ii) to the extent that the provisions of this Section conflict with
any other provisions of this Indenture, the provisions of this Section
shall control;
(iii) the rights of Note Owners will be exercised only through the
Clearing Agency and will be limited to those established by law and
agreements between such Note Owners and the Clearing Agency and/or the
Clearing Agency Participants pursuant to the Depository Agreement;
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(vi) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Holders of Notes evidencing a
specified percentage of the Outstanding Amount of the Notes, the Clearing
Agency will be deemed to represent such percentage only to the extent that
it has received instructions to such effect from Note Owners and/or
Clearing Agency Participants owning or representing, respectively, such
required percentage of the beneficial interest in the Notes and has
delivered such instructions to the Trustee; and
(iv) without the consent of the Issuer and the Trustee, no such Note
may be transferred by the Depository except to a successor Depository that
agrees to hold such Note for the account of the Owners or except upon the
election of the Owner thereof or a subsequent transferee to hold such Note
in physical form.
Neither the Trustee nor the Registrar shall have any responsibility to monitor
or restrict the transfer of beneficial ownership in any Note an interest in
which is transferable through the facilities of the Depository.
If (i) the Administrator advises the Indenture Trustee in writing that the
Clearing Agency is no longer willing or able to properly discharge its
responsibilities with respect to the Notes held in book-entry form and the
Administrator is unable to locate a qualified successor, (ii) the Administrator
at its option advises the Indenture Trustee in writing that it elects to
terminate the book-entry system through the Clearing Agency or (iii) after the
occurrence of an Event of Default or a Servicer Default, Note Owners
representing beneficial interests aggregating at least a majority of the
Outstanding Amount of such Notes advise the Clearing Agency in writing that the
continuation of a book-entry system through the Clearing Agency is no longer in
the best interests of such Note Owners, then the Clearing Agency shall notify
all Note Owners and the Indenture Trustee of the occurrence of any such event
and of the availability of definitive Notes to Note Owners requesting the same.
Upon surrender to the Indenture Trustee of the typewritten Notes representing
the Notes held in book-entry form by the Clearing Agency, accompanied by
registration instructions, the Issuer shall execute and the Indenture Trustee
shall authenticate the definitive Notes in accordance with the instructions of
the Clearing Agency. None of the Issuer, the Note Registrar or the Indenture
Trustee shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of definitive Notes, the Indenture Trustee shall recognize the
Holders of the definitive Notes as Noteholders.
The Issuer shall cause each Note to contain a legend stating that transfer
of the Notes is subject to certain restrictions and referring prospective
purchasers of the Notes to this Section 2.4 with respect to such restrictions.
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SECTION 2.05. Registration; Registration of Transfer and Exchange. (a) The
Issuer shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable regulations as it may prescribe and the restrictions on
transfers of the Notes set forth herein, the Issuer shall provide for the
registration of Notes and the registration of transfers of Notes. The Indenture
Trustee initially shall be the "Note Registrar" for the purpose of registering
Notes and transfers of Notes as herein provided. Upon any resignation of any
Note Registrar, the Issuer shall promptly appoint a successor or, if it elects
not to make such an appointment, assume the duties of Note Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer as
Note Registrar, the Issuer will give the Indenture Trustee prompt written notice
of the appointment of such Note Registrar and of the location, and any change in
the location, of the Note Register, and the Indenture Trustee shall have the
right to inspect the Note Register at all reasonable times and to obtain copies
thereof, and the Indenture Trustee shall have the right to rely upon a
certificate executed on behalf of the Note Registrar by an Executive Officer
thereof as to the names and addresses of the Holders of the Notes and the
principal amounts and number of such Notes.
(b) Subject to the limitations on transfer set forth herein, upon surrender
for registration of transfer of any Note at the office or agency of the Issuer
to be maintained as provided in Section 3.02, if the requirements of Section
8-401(1) of the UCC are met, the Issuer shall execute, and the Indenture Trustee
shall authenticate and the Noteholder shall obtain from the Indenture Trustee,
in the name of the designated transferee or transferees, one or more new Notes
in any authorized denominations, of a like aggregate principal amount.
(c) Notes may be exchanged for other Notes in any authorized denominations,
of a like aggregate principal amount, upon surrender of the Notes to be
exchanged at such office or agency. Whenever any Notes are so surrendered for
exchange, if the requirements of Section 8-401(1) of the UCC are met, the Issuer
shall execute, and the Indenture Trustee shall authenticate and the Noteholder
shall obtain from the Indenture Trustee, the Notes which the Noteholder making
the exchange is entitled to receive.
(d) All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
(e) Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Indenture Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by an "eligible guarantor institution" meeting the
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requirements of the Note Registrar, which requirements include membership or
participation in the Securities Transfer Agent's Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Exchange Act.
(f) Any and all transfers from a Book-Entry Note to a transferee wishing to
take delivery in the form of a definitive Note will require the transferee to
take delivery subject to the restrictions on the transfer of such definitive
Note described in the legend set forth on the face of the Note substantially in
the form of Exhibit A as attached hereto (the "Legend"), and such transferee
agrees that it will transfer such a Note only as provided therein and herein. No
such transfer shall be made and the Trustee shall not register any such transfer
unless such transfer is made in accordance with this Section 2.05.
Upon acceptance for exchange or transfer of a beneficial interest in a
Book-Entry Note for a definitive Note, as provided herein, the Trustee shall
endorse on the schedule affixed to the related Book-Entry Note (or on a
continuation of such schedule affixed to the such Book-Entry Note and made a
part thereof) an appropriate notation evidencing the date of such exchange or
transfer and a decrease in the principal balance of such Book-Entry Note equal
to the principal balance of such definitive Note issued in exchange therefor or
upon transfer thereof. Unless determined otherwise by the Trustee in accordance
with applicable law, a definitive Note issued upon transfer of or exchange for a
beneficial interest in the Book-Entry Note shall bear the Legend.
(g) If a Holder of a definitive Note wishes at any time to transfer such
definitive Note to a Person who wishes to take delivery thereof in the form of a
beneficial interest in the Book-Entry Note, such transfer may be effected only
in accordance with the applicable procedures of the Depository and this Section
2.05 (g). Upon receipt by the Trustee at the Corporate Trust Office of (1) the
definitive Note to be transferred with an assignment and transfer, (2) written
instructions given in accordance with the applicable procedures from a
participant directing the Trustee to credit or cause to be credited to another
specified participant's account a beneficial interest in the Book-Entry Note, in
an amount equal to the principal balance of the definitive Note to be so
transferred, (3) a written order given in accordance with the applicable
procedures containing information regarding the account of the participant to be
credited with such beneficial interest, and (4) representations from the
transferee to the effect that it is a "qualified institutional buyer" as
provided in Section 2(b) of the Investment Letter, the Trustee shall cancel such
definitive Note, execute and deliver a new definitive Note for the principal
balance of the definitive Note not so transferred, registered in the name of the
Holder or the Holder's transferee (as instructed by the Holder), and the Trustee
shall instruct the Depository to increase the principal balance of the
Book-Entry Note, by the
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principal balance of the definitive Note to be so transferred, and to credit or
cause to be credited to the account of the Person specified in such instructions
a corresponding principal balance of the Book-Entry Note.
Under no circumstances may an institutional "accredited investor" within
Regulation D of the Securities Act take delivery in the form of a beneficial
interest in a Book-Entry Note if such purchaser is not a "qualified
institutional buyer" as defined under Rule 144A under the 1933 Act.
(h) An exchange of a beneficial interest in a Book-Entry Note for a
definitive Note or Notes, an exchange of a definitive Note or Notes for a
beneficial interest in the Book-Entry Note and exchange of a definitive Note or
Notes for another definitive Note or Notes (in each case, whether or not such
exchange is made in anticipation of subsequent transfer, and in the case of the
Book-Entry Note, so long as the Book-Entry Note remains outstanding and is held
by or on behalf of the Depository), may be made only in accordance with this
Section 2.05 and in accordance with the rules of the Depository.
(i) No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.03 or 9.05 not involving any transfer.
(j) The preceding provisions of this Section notwithstanding, the Issuer
shall not be required to make, and the Note Registrar need not register,
transfers or exchanges of Notes selected for redemption or of any Note for a
period of 15 days preceding the due date for any payment with respect to the
Note.
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by it to hold the Issuer and the Indenture Trustee
harmless, then, in the absence of written notice to the Issuer, the Note
Registrar or the Indenture Trustee that such Note has been acquired by a bona
fide purchaser, and provided that the requirements of Section 8-405 of the UCC
are met, the Issuer shall execute, and upon its written request the Indenture
Trustee shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Note, a replacement Note; provided,
however, that if any such destroyed, lost or stolen Note, but not a mutilated
Note, shall have become or within seven days shall be due and payable, or shall
have been called for redemption, instead of issuing a replacement Note, the
Issuer may pay such destroyed, lost or
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stolen Note when so due or payable or upon the Redemption Date without surrender
thereof. If, after the delivery of such replacement Note or payment of a
destroyed, lost or stolen Note pursuant to the proviso to the preceding
sentence, a bona fide purchaser of the original Note in lieu of which such
replacement Note was issued presents for payment such original Note, the Issuer
and the Indenture Trustee shall be entitled to recover such replacement Note (or
such payment) from the Person to whom it was delivered or any Person taking such
replacement Note from such Person to whom such replacement Note was delivered or
any assignee of such Person, except a bona fide purchaser, and shall be entitled
to recover upon the security or indemnity provided therefor to the extent of any
loss, damage, cost or expense incurred by the Issuer or the Indenture Trustee in
connection therewith.
Upon the issuance of any replacement Note under this Section, the Issuer
may require the payment by the Holder of such Note of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other reasonable expenses (including the fees and expenses of the Indenture
Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.07. Persons Deemed Owner. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee and any
agent of the Issuer or the Indenture Trustee may treat the Person in whose name
any Note is registered (as of the day of determination) as the owner of such
Note for the purpose of receiving payments of principal of and interest on such
Note and for all other purposes whatsoever, whether or not such Note be overdue,
and none of the Issuer, the Indenture Trustee or any agent of the Issuer or the
Indenture Trustee shall be affected by notice to the contrary.
SECTION 2.08. Payment of Principal and Interest; Defaulted Interest. (a)
The Notes shall accrue interest at the Note Rate, as set forth in Exhibit A, and
such interest shall be payable on each Distribution Date as specified therein,
subject to Section 3.01. Any installment of interest or principal payable on a
Note that is punctually paid or duly provided for by the Issuer on the
applicable Distribution Date shall be paid to the
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Person in whose name such Note (or one or more Predecessor Notes) is registered
on the Record Date by check mailed first-class postage prepaid to such Person's
address as it appears on the Note Register on such Record Date, except that (i)
upon written request of a Noteholder to the Paying Agent not later than the
Record Date prior to the related Distribution Date or (ii) if the registered
Noteholder is the nominee of the Clearing Agency, payment will be made by wire
transfer in immediately available funds to the account designated by such Holder
and except for the final installment of principal payable with respect to such
Note on a Distribution Date or on the Note Final Scheduled Distribution Date,
which shall be payable as provided below. The funds represented by any such
checks returned undelivered shall be held in accordance with Section 3.03.
(b) The principal of each Note shall be payable in installments on each
Distribution Date as provided in the form of the Note set forth in Exhibit A.
Notwithstanding the foregoing, the entire unpaid principal amount of the Notes
shall be due and payable, if not previously paid, on the date on which an Event
of Default shall have occurred and be continuing, if the Indenture Trustee or
Holders of the Notes representing not less than a majority of the Outstanding
Amount of the Notes have declared the Notes to be immediately due and payable in
the manner provided in Section 5.02. All principal payments on the Notes shall
be made pro rata to the Noteholders entitled thereto. The Indenture Trustee
shall notify the Person in whose name a Note is registered at the close of
business on the Record Date preceding the Distribution Date on which the Issuer
expects that the final installment of principal of and interest on such Note
will be paid. Such notice shall be mailed or transmitted by facsimile prior to
such final Distribution Date and shall specify that such final installment will
be payable only upon presentation and surrender of such Note and shall specify
the place where such Note may be presented and surrendered for payment of such
installment. Notices in connection with redemptions of Notes shall be mailed to
Noteholders as provided in Section 10.02.
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the Note Rate in any lawful manner. The Issuer may pay
such defaulted interest to the persons who are Noteholders on a subsequent
special record date, which date shall be at least five Business Days prior to
the payment date. The Issuer shall fix or cause to be fixed any such special
record date and payment date and, at least 15 days before any such special
record date, the Issuer shall mail to each Noteholder a notice that states the
special record date, the payment date and the amount of defaulted interest to be
paid.
SECTION 2.09. Cancellation. All Notes surrendered for payment, registration
of transfer, exchange or redemption shall, if surrendered to any Person other
than the Indenture Trustee, be delivered to the Indenture Trustee and shall be
promptly cancelled by the Indenture Trustee. The Issuer may at any time
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deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly cancelled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for
any Notes cancelled as provided in this Section, except as expressly permitted
by this Indenture. All cancelled Notes may be held or disposed of by the
Indenture Trustee in accordance with its standard retention or disposal policy
as in effect at the time unless the Issuer shall direct by an Issuer Order that
they be destroyed or returned to it and such Issuer Order is timely and the
Notes have not been previously disposed of by the Indenture Trustee.
SECTION 2.10. Tax Treatment. The Issuer has entered into this Indenture,
and the Notes will be issued, with the intention that, for federal, state and
local income, single business and franchise tax purposes, the Notes will qualify
as indebtedness of the Issuer secured by the Trust Estate. The Issuer, by
entering into this Indenture, and each Noteholder, by its acceptance of a Note
(and each Note Owner by its acceptance of a beneficial interest in a Note held
in book-entry form), agree to treat the Notes for federal, state and local
income, single business and franchise tax purposes as indebtedness of the
Issuer.
ARTICLE III
Covenants
SECTION 3.01. Payment of Principal and Interest. The Issuer will duly and
punctually pay the principal of and interest, if any, on the Notes in accordance
with the terms of the Notes and this Indenture. Without limiting the foregoing,
subject to Section 8.02(c), the Issuer will cause to be distributed all amounts
on deposit in the Note Distribution Account on a Distribution Date deposited
therein pursuant to the Sale and Servicing Agreement for the benefit of the
Notes, to the Noteholders. Amounts properly withheld under the Code by any
Person from a payment to any Noteholder of interest and/or principal shall be
considered as having been paid by the Issuer to such Noteholder for all purposes
of this Indenture.
SECTION 3.02. Maintenance of Office or Agency. The Issuer will maintain in
the Borough of Manhattan, The City of New York, an office or agency where Notes
may be surrendered for registration of transfer or exchange, and where notices
and demands to or upon the Issuer in respect of the Notes and this Indenture may
be served. The Issuer hereby initially appoints the Indenture Trustee to serve
as its agent for the foregoing purposes. The Issuer will give prompt written
notice to the Indenture Trustee of the location, and of any change in the
location, of any such office or agency. If at any time the Issuer shall fail to
maintain any such office or agency or shall fail to furnish the Indenture
Trustee with the address thereof, such surrenders, notices and demands may be
made or served at the
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Corporate Trust Office, and the Issuer hereby appoints the Indenture Trustee as
its agent to receive all such surrenders, notices and demands.
SECTION 3.03. Money for Payments To Be Held in Trust. As provided in
Section 8.02(a) and (b), all payments of amounts due and payable with respect to
any Notes that are to be made from amounts withdrawn from the Collection Account
and the Note Distribution Account pursuant to Section 8.02(c) shall be made on
behalf of the Issuer by the Indenture Trustee or by another Paying Agent, and no
amounts so withdrawn from the Collection Account and the Note Distribution
Account for payments of Notes shall be paid over to the Issuer except as
provided in this Section.
On or before the Business Day preceding each Distribution Date and
Redemption Date, the Issuer shall deposit or cause to be deposited in the Note
Distribution Account an aggregate sum sufficient to pay the amounts then
becoming due under the Notes, such sum to be held in trust for the benefit of
the Persons entitled thereto, and (unless the Paying Agent is the Indenture
Trustee) shall promptly notify the Indenture Trustee of its action or failure so
to act.
The Issuer will cause each Paying Agent other than the Indenture Trustee to
execute and deliver to the Indenture Trustee an instrument in which such Paying
Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts
as Paying Agent, it hereby so agrees), subject to the provisions of this
Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and pay such sums to such Persons as herein provided;
(ii) give the Indenture Trustee written notice of any default by the
Issuer (or any other obligor upon the Notes) of which it has actual
knowledge in the making of any payment required to be made with respect to
the Notes;
(iii) at any time during the continuance of any such default, upon the
written request of the Indenture Trustee, forthwith pay to the Indenture
Trustee all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to the
Indenture Trustee all sums held by it in trust for the payment of Notes if
at any time it ceases to meet the standards required to be met by a Paying
Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on
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any Notes of any applicable withholding taxes imposed thereon and with
respect to any applicable reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, by Issuer Order direct
any Paying Agent to pay to the Indenture Trustee all sums held in trust by such
Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts
as those upon which the sums were held by such Paying Agent; and upon such
payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money held
by the Indenture Trustee or any Paying Agent in trust for the payment of any
amount due with respect to any Note and remaining unclaimed for two years after
such amount has become due and payable shall be discharged from such trust and
be paid to the Issuer on Issuer Request; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Indenture Trustee or such Paying Agent with respect to
such trust money shall thereupon cease; provided, however, that the Indenture
Trustee or such Paying Agent, before being required to make any such repayment,
shall at the expense and written direction of the Issuer cause to be published
once, in a newspaper published in the English language, customarily published on
each Business Day and of general circulation in The City of New York, notice
that such money remains unclaimed and that, after a date specified therein,
which shall not be less than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be repaid to the Issuer. The
Indenture Trustee shall also adopt and employ, at the expense and written
direction of the Issuer, any other reasonable means of notification of such
repayment (including, but not limited to, mailing notice of such repayment to
Holders whose Notes have been called but have not been surrendered for
redemption or whose right to or interest in moneys due and payable but not
claimed is determinable from the records of the Indenture Trustee or of any
Paying Agent, at the last address of record for each such Holder).
SECTION 3.04. Existence. The Issuer will keep in full effect its existence,
rights and franchises as a business trust under the laws of the State of
Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other State or of the United States of America,
in which case the Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this
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Indenture, the Notes, the Collateral and each other instrument or agreement
included in the Trust Estate.
SECTION 3.05. Protection of Trust Estate. The Issuer will from time to time
execute and deliver all such supplements and amendments hereto and all such
financing statements, continuation statements, instruments of further assurance
and other instruments, and will take such other action necessary or advisable
to:
(i) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively the
purposes hereof;
(ii) perfect, publish notice of or protect the validity of any Grant
made or to be made by this Indenture;
(iii) enforce any of the Collateral; or
(iv) preserve and defend title to the Trust Estate and the rights of
the Indenture Trustee and the Noteholders in such Trust Estate against the
claims of all persons and parties.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required to be executed pursuant to this Section 3.05.
SECTION 3.06. Opinions as to Trust Estate. (a) On the Closing Date, the
Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either
stating that, in the opinion of such counsel, such action has been taken with
respect to the recording and filing of this Indenture, any indentures
supplemental hereto, and any other requisite documents, and with respect to the
execution and filing of any financing statements and continuation statements, as
are necessary to perfect and make effective the lien and security interest of
this Indenture and reciting the details of such action, or stating that, in the
opinion of such counsel, no such action is necessary to make such lien and
security interest effective.
(b) On or before December 31, in each calendar year, beginning in 1996, the
Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either
stating that, in the opinion of such counsel, such action has been taken with
respect to the recording, filing, re-recording and refiling of this Indenture,
any indentures supplemental hereto and any other requisite documents and with
respect to the execution and filing of any financing statements and continuation
statements as is necessary to maintain the lien and security interest created by
this Indenture and reciting the details of such action, or stating that in the
opinion of such counsel no such action is necessary to maintain such lien and
security interest. Such Opinion of Counsel shall also describe the recording,
filing, re-recording
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and refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and the execution and filing of any financing statements and
continuation statements that will, in the opinion of such counsel, be required
to maintain the lien and security interest of this Indenture until December 31
in the following calendar year.
SECTION 3.07. Performance of Obligations; Servicing of Receivables. (a) The
Issuer will not take any action and will use its best efforts not to permit any
action to be taken by others that would release any Person from any of such
Person's material covenants or obligations under any instrument or agreement
included in the Trust Estate or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture, the Sale and Servicing Agreement or such
other instrument or agreement.
(b) The Issuer may contract with other Persons to assist it in performing
its duties under this Indenture, and any performance of such duties by a Person
identified to the Indenture Trustee in an Officer's Certificate of the Issuer
shall be deemed to be action taken by the Issuer. Initially, the Issuer has
contracted with the Servicer and the Administrator to assist the Issuer in
performing its duties under this Indenture.
(c) The Issuer will punctually perform and observe all of its obligations
and agreements contained in this Indenture, the Basic Documents and in the
instruments and agreements included in the Trust Estate, including but not
limited to filing or causing to be filed all UCC financing statements and
continuation statements required to be filed by the terms of this Indenture and
the Sale and Servicing Agreement in accordance with and within the time periods
provided for herein and therein. Except as otherwise expressly provided therein,
the Issuer shall not waive, amend, modify, supplement or terminate any Basic
Document or any provision thereof without the consent of the Indenture Trustee
or the Holders of at least a majority of the Outstanding Amount of the Notes.
(d) If the Issuer shall have knowledge of the occurrence of a Servicer
Default under the Sale and Servicing Agreement, the Issuer shall promptly notify
the Indenture Trustee and the Rating Agencies thereof, and shall specify in such
notice the action, if any, the Issuer is taking with respect to such default. If
a Servicer Default shall arise from the failure of the Servicer to perform any
of its duties or obligations under the Sale and Servicing Agreement with respect
to the Receivables, the Issuer shall take all reasonable steps available to it
to remedy such failure.
(e) In the event of the Servicer's termination under the Sale and Servicing
Agreement, the Indenture Trustee shall appoint a successor Servicer, and the
successor Servicer shall accept its
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appointment (including its appointment as Administrator under the Administration
Agreement as set forth in Section 8.02(b) of the Sale and Servicing Agreement)
by a written assumption in form acceptable to the Owner Trustee and the
Indenture Trustee. If the Indenture Trustee appoints the Backup Servicer as
successor Servicer in accordance with Sections 7.03 or 8.01 of the Sale and
Servicing Agreement (after confirmation from each Rating Agency that such
appointment will not result in the withdrawal or downgrade of the then current
ratings of the Notes and the Certificates), the Backup Servicer shall be the
successor in all respects to the Servicer in its capacity as Servicer under the
Sale and Servicing Agreement and the transactions set forth or provided for
therein and shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Servicer by the terms and provisions thereof;
provided, however, that the Backup Servicer shall not be liable for any acts or
omissions of the Servicer occurring prior to such succession or for any breach
by the Servicer of any of its representations and warranties contained therein
or in any related document or agreement. Notwithstanding the above, if the
Backup Servicer is legally unable or unwilling to act as Servicer, the Indenture
Trustee will appoint a successor Servicer to act as Servicer. As compensation
for acting as successor Servicer, the Backup Servicer shall be entitled to
receive the Servicing Fee. In the event that a successor Servicer has not been
appointed at the time when the predecessor Servicer has ceased to act as
Servicer in accordance with this Section, the Indenture Trustee without further
action shall automatically be appointed the successor Servicer and the Indenture
Trustee shall be entitled to the Servicing Fee. Notwithstanding the above, the
Indenture Trustee shall, if it shall be legally unable or unwilling so to act,
appoint or petition a court of competent jurisdiction to appoint any established
institution, having a net worth of not less than $50,000,000 and whose regular
business shall include the servicing of automotive receivables, as the successor
to the Servicer under the Sale and Servicing Agreement.
(f) Upon any termination of the Servicer's rights and powers pursuant to
the Sale and Servicing Agreement, the Issuer shall promptly notify the Indenture
Trustee in writing. As soon as a Successor Servicer is appointed, the Issuer
shall notify the Indenture Trustee of such appointment, specifying in such
notice the name and address of such Successor Servicer.
(g) Without derogating from the absolute nature of the assignment granted
to the Indenture Trustee under this Indenture or the rights of the Indenture
Trustee hereunder, the Issuer agrees (i) that it will not, without the prior
written consent of the Indenture Trustee or the Holders of at least a majority
in Outstanding Amount of the Notes, amend, modify, waive, supplement, terminate
or surrender, or agree to any amendment, modification, supplement, termination,
waiver or surrender of, the terms of any Collateral (except to the extent
otherwise provided in the Sale and Servicing Agreement) or the Basic Documents,
or waive timely performance or observance by the
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Servicer or the Depositor under the Sale and Servicing Agreement; and (ii) that
any such amendment shall not (A) increase or reduce in any manner the amount of,
or accelerate or delay the timing of, distributions that are required to be made
for the benefit of the Noteholders or (B) reduce the aforesaid percentage of the
Notes that is required to consent to any such amendment, without the consent of
the Holders of all the Outstanding Notes. If any such amendment, modification,
supplement or waiver shall be so consented to by the Indenture Trustee or such
Holders, the Issuer agrees, promptly following a request by the Indenture
Trustee to do so, to execute and deliver, in its own name and at its own
expense, such agreements, instruments, consents and other documents as the
Indenture Trustee may deem necessary or appropriate in the circumstances.
SECTION 3.08. Negative Covenants. So long as any Notes are Outstanding, the
Issuer shall not:
(i) except as expressly permitted by this Indenture or the Sale and
Servicing Agreement, sell, transfer, exchange or otherwise dispose of any
of the properties or assets of the Issuer, including those included in the
Trust Estate, unless directed to do so by the Indenture Trustee;
(ii) claim any credit on, or make any deduction from the principal or
interest payable in respect of, the Notes (other than amounts properly
withheld from such payments under the Code) or assert any claim against any
present or former Noteholder by reason of the payment of the taxes levied
or assessed upon any part of the Trust Estate; or
(iii) (A) permit the validity or effectiveness of this Indenture to be
impaired, or permit the lien of this Indenture to be amended, hypothecated,
subordinated, terminated or discharged, or permit any Person to be released
from any covenants or obligations with respect to the Notes under this
Indenture except as may be expressly permitted hereby, (B) permit any lien,
charge, excise, claim, security interest, mortgage or other encumbrance
(other than the lien of this Indenture) to be created on or extend to or
otherwise arise upon or burden the Trust Estate or any part thereof or any
interest therein or the proceeds thereof (other than tax liens, mechanics'
liens and other liens that arise by operation of law, in each case on any
of the Financed Vehicles and arising solely as a result of an action or
omission of the related Obligor) or (C) permit the lien of this Indenture
not to constitute a valid first priority (other than with respect to any
such tax, mechanics' or other lien) security interest in the Trust Estate.
SECTION 3.09. Annual Statement as to Compliance. The Issuer will deliver to
the Indenture Trustee, within 120 days after the end of each fiscal year of the
Issuer (commencing with the fiscal
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year 1996), an Officer's Certificate stating, as to the Authorized Officer
signing such Officer's Certificate, that:
(i) a review of the activities of the Issuer during such year and of
its performance under this Indenture has been made under such Authorized
Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on such
review, the Issuer has complied with all conditions and covenants under
this Indenture throughout such year, or, if there has been a default in its
compliance with any such condition or covenant, specifying each such
default known to such Authorized Officer and the nature and status thereof.
SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms. (a) The
Issuer shall not consolidate or merge with or into any other Person, unless:
(i) the Person (if other than the Issuer) formed by or surviving such
consolidation or merger shall be a Person organized and existing under the
laws of the United States of America or any State and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Indenture Trustee, in form satisfactory to the Indenture Trustee, the due
and punctual payment of the principal of and interest on all Notes and the
performance or observance of every agreement and covenant of this Indenture
on the part of the Issuer to be performed or observed, all as provided
herein;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and shall
have delivered copies thereof to the Indenture Trustee) to the effect that
such transaction will not have any material adverse tax consequence to the
Issuer, any Noteholder or any Certificateholder;
(v) any action that is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation or merger and such supplemental indenture comply with this
Article III and that all conditions precedent herein provided for relating
to such transaction have been complied with (including any filing required
by the Exchange Act).
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(b) The Issuer shall not convey or transfer any of its properties or
assets, including those included in the Trust Estate, to any Person, unless:
(i) the Person that acquires by conveyance or transfer the properties
and assets of the Issuer the conveyance or transfer of which is hereby
restricted (A) shall be a United States citizen or a Person organized and
existing under the laws of the United States of America or any State, (B)
expressly assumes, by an indenture supplemental hereto, executed and
delivered to the Indenture Trustee, in form satisfactory to the Indenture
Trustee, the due and punctual payment of the principal of and interest on
all Notes and the performance or observance of every agreement and covenant
of this Indenture on the part of the Issuer to be performed or observed,
all as provided herein, (C) expressly agrees by means of such supplemental
indenture that all right, title and interest so conveyed or transferred
shall be subject and subordinate to the rights of Holders of the Notes, and
(D) unless otherwise provided in such supplemental indenture, expressly
agrees to indemnify, defend and hold harmless the Issuer against and from
any loss, liability or expense arising under or related to this Indenture
and the Notes;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and shall
have delivered copies thereof to the Indenture Trustee) to the effect that
such transaction will not have any material adverse tax consequence to the
Issuer, any Noteholder or any Certificateholder;
(v) any action that is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
conveyance or transfer and such supplemental indenture comply with this
Article III and that all conditions precedent herein provided for relating
to such transaction have been complied with (including any filing required
by the Exchange Act).
SECTION 3.11. Successor or Transferee. (a) Upon any consolidation or merger
of the Issuer in accordance with Section 3.10(a), the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and
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power of, the Issuer under this Indenture with the same effect as if such Person
had been named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of the
Issuer pursuant to Section 3.10(b), NAL Auto Trust 1996-3 will be released from
every covenant and agreement of this Indenture to be observed or performed on
the part of the Issuer with respect to the Notes immediately upon the delivery
of written notice to the Indenture Trustee stating that NAL Auto Trust 1996-3 is
to be so released.
SECTION 3.12. No Other Business. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Receivables in the manner contemplated by this Indenture and the Basic Documents
and activities incidental thereto.
SECTION 3.13. No Borrowing. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes.
SECTION 3.14. Servicer's Obligations. The Issuer shall cause the Servicer
to comply with Sections 4.09, 4.10, 4.11 and Article IX of the Sale and
Servicing Agreement.
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities. Except as
contemplated by the Sale and Servicing Agreement or this Indenture, the Issuer
shall not make any loan or advance or credit to, or guarantee (directly or
indirectly or by an instrument having the effect of assuring another's payment
or performance on any obligation or capability of so doing or otherwise),
endorse or otherwise become contingently liable, directly or indirectly, in
connection with the obligations, stocks or dividends of, or own, purchase,
repurchase or acquire (or agree contingently to do so) any stock, obligations,
assets or securities of, or any other interest in, or make any capital
contribution to, any other Person.
SECTION 3.16. Capital Expenditures. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 3.17. Removal of Administrator. So long as any Notes are
Outstanding, the Issuer shall not remove the Administrator without cause unless
the Rating Agency Condition shall have been satisfied in connection with such
removal.
SECTION 3.18. Restricted Payments. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer or to the Servicer, (ii) redeem, purchase, retire or
otherwise acquire for value any such
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ownership or equity interest or security or (iii) set aside or otherwise
segregate any amounts for any such purpose; provided, however, that the Issuer
may make, or cause to be made, (x) distributions to the Servicer, the Owner
Trustee and the Certificateholders as contemplated by, and to the extent funds
are available for such purpose under, the Sale and Servicing Agreement or the
Trust Agreement and (y) payments to the Indenture Trustee pursuant to Section
1(a)(ii) of the Administration Agreement. The Issuer will not, directly or
indirectly, make payments to or distributions from the Collection Account except
in accordance with this Indenture and the Basic Documents.
SECTION 3.19. Notice of Events of Default. The Issuer shall give the
Indenture Trustee and the Rating Agencies prompt written notice of each Event of
Default hereunder and each default on the part of the Servicer of its
obligations under the Sale and Servicing Agreement.
SECTION 3.20. Further Instruments and Acts. Upon request of the Indenture
Trustee, the Issuer will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
ARTICLE IV
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of Indenture. This Indenture shall
cease to be of further effect with respect to the Notes except as to (i) rights
of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.03, 3.04, 3.05, 3.08,
3.10, 3.12 and 3.13, (v) the rights, obligations and immunities of the Indenture
Trustee hereunder (including the rights of the Indenture Trustee under Section
6.07 and the obligations of the Indenture Trustee under Section 4.02) and (vi)
the rights of Noteholders as beneficiaries hereof with respect to the property
so deposited with the Indenture Trustee payable to all or any of them, and the
Indenture Trustee, on demand of and at the expense of the Issuer, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture
with respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other than (i)
Notes that have been destroyed, lost or stolen and that have been replaced
or paid as provided in Section 2.06 and (ii) Notes for whose payment money
has theretofore been deposited in trust or segregated and held in trust by
the Issuer and thereafter repaid to the Issuer or
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discharged from such trust, as provided in Section 3.03) have been
delivered to the Indenture Trustee for cancellation; or
(2) all Notes not theretofore delivered to the Indenture Trustee for
cancellation
a. have become due and payable,
b. are to be called for redemption within one year under
arrangements satisfactory to the Indenture Trustee for the giving of
notice of redemption by the Indenture Trustee in the name, and at the
expense, of the Issuer,
and the Issuer, in the case of a. or b. above, has irrevocably deposited or
caused to be irrevocably deposited with the Indenture Trustee cash or
direct obligations of or obligations guaranteed by the United States of
America (which will mature prior to the date such amounts are payable), in
trust for such purpose, in an amount sufficient to pay and discharge the
entire indebtedness on such Notes not theretofore delivered to the
Indenture Trustee for cancellation when due to the applicable final
scheduled Distribution Date or Redemption Date, as the case may be;
(B) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee an Officer's
Certificate, an Opinion of Counsel and (if required by the Indenture
Trustee) an Independent Certificate from a firm of certified public
accountants, each meeting the applicable requirements of Section 11.01(a)
and, subject to Section 11.02, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
SECTION 4.02. Application of Trust Money. All moneys deposited with the
Indenture Trustee pursuant to Section 4.01 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent, as the
Indenture Trustee may determine, to the Holders of the particular Notes for the
payment or redemption of which such moneys have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal and
interest; but such moneys need not be segregated from other funds except to the
extent required herein or in the Sale and Servicing Agreement or required by
law.
SECTION 4.03. Repayment of Moneys Held by Paying Agent. In connection with
the satisfaction and discharge of this Indenture with respect to the Notes, all
moneys then held by any Paying Agent other than the Indenture Trustee under the
provisions of this Indenture with respect to such Notes shall, upon demand of
the Issuer, be paid to the Indenture Trustee to be held and
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applied according to Section 3.03 and thereupon such Paying Agent shall be
released from all further liability with respect to such moneys.
ARTICLE V
Remedies
SECTION 5.01. Events of Default. "Event of Default," wherever used herein,
means any one of the following events (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest on any Note when the same
becomes due and payable, and such default shall continue for a period of
five days; or
(ii) default in the payment of the principal of or any installment of
the principal of any Note when the same becomes due and payable; or
(iii) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is elsewhere
in this Section specifically dealt with), or any representation or warranty
of the Issuer made in this Indenture or in any certificate or other writing
delivered pursuant hereto or in connection herewith proving to have been
incorrect in any material respect as of the time when the same shall have
been made, and such default shall continue or not be cured, or the
circumstance or condition in respect of which such misrepresentation or
warranty was incorrect shall not have been eliminated or otherwise cured,
for a period of 30 days after there shall have been given, by registered or
certified mail, to the Issuer by the Indenture Trustee or to the Issuer and
the Indenture Trustee by the Holders of at least 25% of the Outstanding
Amount of the Notes, a written notice specifying such default or incorrect
representation or warranty and requiring it to be remedied and stating that
such notice is a notice of Default hereunder; or
(iv) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any substantial
part of the Trust Estate in an involuntary case under any applicable
federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Issuer or for
any substantial part of the Trust Estate, or ordering the winding-up or
liquidation of the Issuer's
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affairs, and such decree or order shall remain unstayed and in effect for a
period of 60 consecutive days; or
(v) the commencement by the Issuer of a voluntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now
or hereafter in effect, or the consent by the Issuer to the entry of an
order for relief in an involuntary case under any such law, or the consent
by the Issuer to the appointment or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of the Issuer or for any substantial part of the Trust Estate, or the
making by the Issuer of any general assignment for the benefit of
creditors, or the failure by the Issuer generally to pay its debts as such
debts become due, or the taking of any action by the Issuer in furtherance
of any of the foregoing.
The Issuer shall deliver to the Indenture Trustee, within five days after the
occurrence thereof, written notice in the form of an Officer's Certificate of
any event which with the giving of notice and the lapse of time would become an
Event of Default under clause (iii), its status and what action the Issuer is
taking or proposes to take with respect thereto.
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default should occur and be continuing, then and in every such case the
Indenture Trustee or the Holders of Notes representing not less than a majority
of the Outstanding Amount of the Notes may declare all the Notes to be
immediately due and payable, by a notice in writing to the Issuer (and to the
Indenture Trustee if given by Noteholders), and upon any such declaration the
unpaid principal amount of such Notes, together with accrued and unpaid interest
thereon through the date of acceleration, shall become immediately due and
payable.
At any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided, the
Holders of Notes representing a majority of the Outstanding Amount of the Notes,
by written notice to the Issuer and the Indenture Trustee, may rescind and annul
such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Indenture Trustee a sum
sufficient to pay:
(A) all payments of principal of and interest on all Notes and all
other amounts that would then be due hereunder or upon such Notes if the
Event of Default giving rise to such acceleration had not occurred; and
(B) all sums paid or advanced by the Indenture Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances of the
Indenture Trustee and its agents and counsel; and
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(ii) all Events of Default, other than the nonpayment of the principal
of the Notes that has become due solely by such acceleration, have been
cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any right
consequent thereto.
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee. (a) The Issuer covenants that if (i) default is made in the
payment of any interest on any Note when the same becomes due and payable, and
such default continues for a period of five days, or (ii) default is made in the
payment of the principal of or any installment of the principal of any Note when
the same becomes due and payable, the Issuer will, upon demand of the Indenture
Trustee, pay to it, for the benefit of the Holders of the Notes, the whole
amount then due and payable on such Notes for principal and interest, with
interest on the overdue principal, and, to the extent payment at such rate of
interest shall be legally enforceable, on overdue installments of interest, at
the rate borne by the Notes and in addition thereto such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Indenture
Trustee and its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon such
demand, the Indenture Trustee, in its own name and as trustee of an express
trust, may institute a Proceeding for the collection of the sums so due and
unpaid, and may prosecute such Proceeding to judgment or final decree, and may
enforce the same against the Issuer or other obligor upon such Notes and collect
in the manner provided by law out of the property of the Issuer or other obligor
upon such Notes, wherever situated, the moneys adjudged or decreed to be
payable.
(c) If an Event of Default occurs and is continuing, the Indenture Trustee
may, as more particularly provided in Section 5.04, in its discretion, proceed
to protect and enforce its rights and the rights of the Noteholders, by such
appropriate Proceedings as the Indenture Trustee shall deem most effective to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy or legal or equitable
right vested in the Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Estate, Proceedings under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization, or
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer
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or its property or such other obligor or Person, or in case of any other
comparable judicial Proceedings relative to the Issuer or other obligor upon the
Notes, or to the creditors or property of the Issuer or such other obligor, the
Indenture Trustee, irrespective of whether the principal of any Notes shall then
be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Indenture Trustee shall have made any demand
pursuant to the provisions of this Section, shall be entitled and empowered, by
intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to file
such other papers or documents as may be necessary or advisable in order to
have the claims of the Indenture Trustee (including any claim for
reasonable compensation to the Indenture Trustee and each predecessor
Indenture Trustee, and their respective agents, attorneys and counsel, and
for reimbursement of all expenses and liabilities incurred, and all
advances made, by the Indenture Trustee and each predecessor Indenture
Trustee, except as a result of negligence or bad faith) and of the
Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of Notes in any election of a trustee, a standby
trustee or Person performing similar functions in any such Proceedings;
(iii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute all amounts received with
respect to the claims of the Noteholders and of the Indenture Trustee on
their behalf; and
(iv) to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Indenture
Trustee or the Holders of Notes allowed in any Proceedings relative to the
Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee except as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or
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accept or adopt on behalf of any Noteholder any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights of any
Holder thereof or to authorize the Indenture Trustee to vote in respect of the
claim of any Noteholder in any such proceeding except, as aforesaid, to vote for
the election of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or Proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes.
(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Holders of the Notes, and it shall not be necessary to
make any Noteholder a party to any such Proceedings.
SECTION 5.04. Remedies; Priorities. (a) If an Event of Default shall have
occurred and be continuing, the Indenture Trustee may do one or more of the
following (subject to Section 5.05):
(i) institute Proceedings in its own name and as trustee of an express
trust for the collection of all amounts then payable on the Notes or under
this Indenture with respect thereto, whether by declaration or otherwise,
enforce any judgment obtained and collect from the Issuer and any other
obligor upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust Estate;
(iii) exercise any remedies of a secured party under the UCC and take
any other appropriate action to protect and enforce the rights and remedies
of the Indenture Trustee and the Holders of the Notes; and
(iv) sell the Trust Estate or any portion thereof or rights or
interest therein, at one or more public or private sales called and
conducted in any manner permitted by law;
provided, however, that the Indenture Trustee may not sell or otherwise
liquidate the Trust Estate following an Event of Default, other than an Event of
Default described in Section 5.01(i) or (ii), unless (A) the Holders of 100% of
the
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Outstanding Amount of the Notes consent thereto, (B) the proceeds of such sale
or liquidation distributable to the Noteholders are sufficient to discharge in
full all amounts then due and unpaid upon such Notes for principal and interest
or (C) the Indenture Trustee determines that the Trust Estate will not continue
to provide sufficient funds for the payment of principal of and interest on the
Notes as they would have become due if the Notes had not been declared due and
payable, and the Indenture Trustee obtains the consent of Holders of 66-2/3% of
the Outstanding Amount of the Notes. In determining such sufficiency or
insufficiency with respect to clause (B) and (C), the Indenture Trustee may, but
need not, obtain and rely upon an opinion of an Independent investment banking
or accounting firm of national reputation as to the feasibility of such proposed
action and as to the sufficiency of the Trust Estate for such purpose, which
opinion shall be conclusive evidence as to such feasibility or sufficiency.
(b) If the Indenture Trustee collects any money or property pursuant to this
Article V, it shall pay out the money or property in the following order:
FIRST: to the Indenture Trustee for amounts due under Section 6.07;
SECOND: to Holders of the Notes for amounts due and unpaid on the
Notes for interest (including any premium), ratably, without preference or
priority of any kind, according to the amounts due and payable on the Notes
for interest (including any premium);
THIRD: to the Issuer for amounts required to be distributed to the
Certificateholders in respect of interest pursuant to the Trust Agreement;
FOURTH: to Holders of the Notes for amounts due and unpaid on the
Notes for principal, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal, until
the Outstanding Amount of the Notes is reduced to zero;
FIFTH: to the Issuer for amounts required to be distributed to the
Certificateholders in respect of principal pursuant to the Trust Agreement.
The Indenture Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Section. At least 15 days before such record date,
the Issuer shall mail to each Noteholder and the Indenture Trustee a notice that
states the record date, the payment date and the amount to be paid.
SECTION 5.05. Optional Preservation of the Receivables. If the Notes have
been declared to be due and payable under Section 5.02 following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, the Indenture
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Trustee may, but need not, elect to maintain possession of the Trust Estate. It
is the desire of the parties hereto and the Noteholders that there be at all
times sufficient funds for the payment of principal of and interest on the
Notes, and the Indenture Trustee shall take such desire into account when
determining whether or not to maintain possession of the Trust Estate. In
determining whether to maintain possession of the Trust Estate, the Indenture
Trustee may, but need not, obtain and rely upon an opinion of an Independent
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the Trust
Estate for such purpose, which opinion shall be conclusive evidence as to such
sufficiency.
SECTION 5.06. Limitation of Suits. No Holder of any Note shall have any right
to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Holder has previously given written notice to the Indenture
Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Outstanding Amount of the
Notes have made written request to the Indenture Trustee to institute such
Proceeding in respect of such Event of Default in its own name as Indenture
Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture Trustee
indemnity reasonably satisfactory to it against the costs, expenses and
liabilities to be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such
Proceedings; and
(v) no direction inconsistent with such written request has been given
to the Indenture Trustee during such 60-day period by the Holders of a
majority of the Outstanding Amount of the Notes.
It is understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Indenture Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of Holders of Notes, each
representing less than a majority of the Outstanding Amount of the Notes, the
Indenture Trustee in its
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sole discretion may determine what action, if any, shall be taken,
notwithstanding any other provisions of this Indenture.
SECTION 5.07. Unconditional Rights of Noteholders To Receive Principal and
Interest. Notwithstanding any other provisions in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest, if any, on such Note on or after the
respective due dates thereof expressed in such Note or in this Indenture (or, in
the case of redemption, on or after the Redemption Date) and to institute suit
for the enforcement of any such payment, and such right shall not be impaired
without the consent of such Holder.
SECTION 5.08. Restoration of Rights and Remedies. If the Indenture Trustee
or any Noteholder has instituted any Proceeding to enforce any right or remedy
under this Indenture and such Proceeding has been discontinued or abandoned for
any reason or has been determined adversely to the Indenture Trustee or to such
Noteholder, then and in every such case the Issuer, the Indenture Trustee and
the Noteholders shall, subject to any determination in such Proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Indenture Trustee and the Noteholders
shall continue as though no such Proceeding had been instituted.
SECTION 5.09. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Indenture Trustee or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.10. Delay or Omission Not a Waiver. No delay or omission of the
Indenture Trustee or any Holder of any Note to exercise any right or remedy
accruing upon any Default or Event of Default shall impair any such right or
remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article V or by law
to the Indenture Trustee or to the Noteholders may be exercised from time to
time, and as often as may be deemed expedient, by the Indenture Trustee or by
the Noteholders, as the case may be.
SECTION 5.11. Control by Noteholders. The Holders of a majority of the
Outstanding Amount of the Notes shall have the right to direct the time, method
and place of conducting any Proceeding for any remedy available to the Indenture
Trustee with respect to the Notes or exercising any trust or power conferred on
the Indenture Trustee; provided that:
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(i) such direction shall not be in conflict with any rule of law or
with this Indenture;
(ii) subject to the express terms of Section 5.04, any direction to
the Indenture Trustee to sell or liquidate the Trust Estate shall be by
Holders of Notes representing not less than 100% of the Outstanding Amount
of the Notes;
(iii) if the conditions set forth in Section 5.05 have been satisfied
and the Indenture Trustee elects to retain the Trust Estate pursuant to
such Section, then any direction to the Indenture Trustee by Holders of
Notes representing less than 100% of the Outstanding Amount of the Notes to
sell or liquidate the Trust Estate shall be of no force and effect; and
(iv) the Indenture Trustee may take any other action deemed proper by
the Indenture Trustee that is not inconsistent with such direction.
Notwithstanding the rights of Noteholders set forth in this Section, subject to
Section 6.01, the Indenture Trustee need not take any action that it determines
might involve it in liability or might materially adversely affect the rights of
any Noteholders not consenting to such action.
SECTION 5.12. Waiver of Past Defaults. Prior to the declaration of the
acceleration of the maturity of the Notes as provided in Section 5.02, the
Holders of Notes of not less than a majority of the Outstanding Amount of the
Notes may waive any past Default or Event of Default and its consequences except
a Default (a) in payment of principal of or interest on any of the Notes or (b)
in respect of a covenant or provision hereof which cannot be modified or amended
without the consent of the Holder of each Note. In the case of any such waiver,
the Issuer, the Indenture Trustee and the Holders of the Notes shall be restored
to their former positions and rights hereunder, respectively, but no such waiver
shall extend to any subsequent or other Default or impair any right consequent
thereto.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
SECTION 5.13. Undertaking for Costs. All parties to this Indenture agree,
and each Holder of a Note by such Holder's acceptance thereof shall be deemed to
have agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in
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such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder for
the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note and in this Indenture (or,
in the case of redemption, on or after the Redemption Date).
SECTION 5.14. Waiver of Stay or Extension Laws. The Issuer covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Indenture
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
SECTION 5.15. Action on Notes. The Indenture Trustee's right to seek and
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture nor any rights or remedies
of the Indenture Trustee or the Noteholders shall be impaired by the recovery of
any judgment by the Indenture Trustee against the Issuer or by the levy of any
execution under such judgment upon any portion of the Trust Estate or upon any
of the assets of the Issuer. Any money or property collected by the Indenture
Trustee shall be applied in accordance with Section 5.04(b).
SECTION 5.16. Performance and Enforcement of Certain Obligations. (a)
Promptly following a request from the Indenture Trustee to do so and at the
Administrator's expense, the Issuer shall take all such lawful action as the
Indenture Trustee may request to compel or secure the performance and observance
by the Depositor, the Servicer or NAL, as applicable, of each of their
obligations to the Issuer under or in connection with the Sale and Servicing
Agreement and the Receivable Purchase Agreement and to exercise any and all
rights, remedies, powers and privileges lawfully available to the Issuer under
or in connection with the Sale and Servicing Agreement or the Receivables
Purchase Agreement to the extent and in the manner directed by the Indenture
Trustee, including the transmission of notices of default on the part of the
Depositor, the Servicer, or NAL thereunder and the institution of legal or
administrative
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actions or proceedings to compel or secure performance by the Depositor or the
Servicer of each of their obligations under the Sale and Servicing Agreement or
the Receivables Purchase Agreement.
(b) If an Event of Default has occurred and is continuing, the Indenture
Trustee may, and at the direction (which direction shall be in writing or by
telephone (confirmed in writing promptly thereafter)) of the Holders of 66-2/3%
of the Outstanding Amount of the Notes shall, exercise all rights, remedies,
powers, privileges and claims of the Issuer against the Depositor or the
Servicer under or in connection with the Sale and Servicing Agreement and the
Receivables Purchase Agreement including the right or power to take any action
to compel or secure performance or observance by the Depositor, the Servicer or
NAL, as the case may be, of each of their obligations to the Issuer thereunder
and to give any consent, request, notice, direction, approval, extension or
waiver under the Sale and Servicing Agreement and the Receivables Purchase
Agreement, as the case may be, and any right of the Issuer to take such action
shall be suspended.
ARTICLE VI
The Indenture Trustee
SECTION 6.01. Duties of Indenture Trustee. (a) If an Event of Default has
occurred and is continuing of which a Responsible Officer of the Indenture
Trustee shall have actual knowledge, the Indenture Trustee shall exercise the
rights and powers vested in it by this Indenture and use the same degree of care
and skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture; however, the Indenture Trustee shall
examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
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(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is proved
that the Indenture Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Indenture Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 5.11.
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this
Section.
(e) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(f) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the Sale and Servicing Agreement.
(g) No provision of this Indenture shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or indemnity reasonably satisfactory to it against such risk or
liability is not reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Indenture Trustee shall be
subject to the provisions of this Section.
SECTION 6.02. Rights of Indenture Trustee. (a) The Indenture Trustee may
conclusively rely, as to the truth of the statements or the correctness of the
opinions expressed therein, on any document believed by it to be genuine and to
have been signed or presented by the proper person. The Indenture Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on an Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee,
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and the Indenture Trustee shall not be responsible for any misconduct or
negligence on the part of, or for the supervision of, any such agent, attorney,
custodian or nominee appointed with due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Indenture Trustee's conduct does
not constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, including Issuer's
counsel, and the advice or opinion of counsel with respect to legal matters
relating to this Indenture and the Notes shall be full and complete
authorization and protection from liability in respect to any action taken,
omitted or suffered by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.
SECTION 6.03. Individual Rights of Indenture Trustee. The Indenture Trustee
in its individual or any other capacity may become the owner or pledgee of Notes
and may otherwise deal with the Issuer or its Affiliates with the same rights it
would have if it were not Indenture Trustee. Any Paying Agent, Note Registrar,
co-registrar or co-paying agent may do the same with like rights. However, the
Indenture Trustee must comply with Section 6.11.
SECTION 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee shall
not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Issuer's use of the proceeds from the Notes, and it shall not be responsible for
any statement of the Issuer in the Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Indenture
Trustee's certificate of authentication.
SECTION 6.05. Notice of Defaults. If a Default occurs and is continuing and
if it is either actually known or written notice of the existence thereof has
been delivered to a Responsible Officer of the Indenture Trustee, the Indenture
Trustee shall promptly mail to each Noteholder and each Rating Agency notice of
the Default. Except in the case of a Default in payment of principal of or
interest on any Note (including payments pursuant to the mandatory redemption
provisions of such Note), the Indenture Trustee may withhold the notice if and
so long as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of Noteholders. To the extent that a
Responsible Officer has actual knowledge thereof or receives written notice
thereof, the Indenture Trustee shall provide each Rating Agency promptly with
notice in the event that any Event of Default is cured or waived, including a
description of the nature and extent of such Event of Default and the actions
taken to cure or waive it.
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SECTION 6.06. Reports by Indenture Trustee to Holders. The Indenture
Trustee shall deliver to each Noteholder such information as may be required to
enable such holder to prepare its federal and state income tax returns.
SECTION 6.07. Compensation and Indemnity. The Issuer shall, or shall cause
the Administrator to, pay to the Indenture Trustee from time to time reasonable
compensation for its services. The Indenture Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Issuer
shall, or shall cause the Administrator to, reimburse the Indenture Trustee for
all reasonable out-of-pocket expenses incurred or made by it, including costs of
collection, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Indenture Trustee's agents, counsel, accountants and experts.
The Issuer shall, or shall cause the Administrator to, indemnify the Indenture
Trustee against any and all loss, liability or expense (including attorneys'
fees and expenses) incurred by it in connection with the administration of this
trust and the performance of its duties hereunder and under the Account
Agreement. The Indenture Trustee shall notify the Issuer and the Administrator
promptly of any claim for which it may seek indemnity. Failure by the Indenture
Trustee to so notify the Issuer and the Administrator shall not relieve the
Issuer or the Administrator of its obligations hereunder. The Issuer shall, or
shall cause the Administrator to, defend any such claim, and the Indenture
Trustee may have separate counsel and the Issuer shall, or shall cause the
Administrator to, pay the fees and expenses of such counsel. Neither the Issuer
nor the Administrator need reimburse any expense or indemnify against any loss,
liability or expense incurred by the Indenture Trustee through the Indenture
Trustee's own willful misconduct, negligence or bad faith.
The Issuer's obligations to the Indenture Trustee pursuant to this Section
shall survive the discharge of this Indenture, the maturity of the Notes and the
resignation or removal of the Indenture Trustee. When the Indenture Trustee
incurs expenses after the occurrence of a Default specified in Section 5.01(iv)
or (v) with respect to the Issuer, the expenses are intended to constitute
expenses of administration under Title 11 of the United States Code or any other
applicable federal or state bankruptcy, insolvency or similar law.
SECTION 6.08. Replacement of Indenture Trustee. No resignation or removal
of the Indenture Trustee and no appointment of a successor Indenture Trustee
shall become effective until the acceptance of appointment by the successor
Indenture Trustee pursuant to this Section 6.08. The Indenture Trustee may
resign at any time by so notifying the Issuer. The Holders of a majority in
Outstanding Amount of the Notes may remove the Indenture Trustee by so notifying
the Indenture Trustee and may appoint a successor Indenture Trustee. The Issuer
shall remove the Indenture Trustee if:
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(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) the Indenture Trustee is adjudged a bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the Indenture
Trustee or its property; or
(iv) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists in the
office of Indenture Trustee for any reason (the Indenture Trustee in such event
being referred to herein as the retiring Indenture Trustee), the Issuer shall
promptly appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective,
and the successor Indenture Trustee shall have all the rights, powers and duties
of the Indenture Trustee under this Indenture. The successor Indenture Trustee
shall mail a notice of its succession to Noteholders. The retiring Indenture
Trustee shall promptly transfer all property of the Issuer, including all
property in the Trust Estate, held by it as Indenture Trustee to the successor
Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days after
the retiring Indenture Trustee resigns or is removed, the retiring Indenture
Trustee, the Issuer or the Holders of a majority in Outstanding Amount of the
Notes may petition any court of competent jurisdiction for the appointment of a
successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any Noteholder
may petition any court of competent jurisdiction for the removal of the
Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to this
Section, the Issuer's and the Administrator's obligations under Section 6.07
shall continue for the benefit of the retiring Indenture Trustee. The Indenture
Trustee shall not be liable for the acts or omissions of any successor Indenture
Trustee.
SECTION 6.09. Successor Indenture Trustee by Merger. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee; provided,
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that such corporation or banking association shall be otherwise qualified and
eligible under Section 6.11. The Indenture Trustee shall provide the Rating
Agencies prior written notice of any such transaction.
In case at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
Trustee. (a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Trust Estate may at the time be located, the Indenture
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Trust, and to vest in
such Person or Persons, in such capacity and for the benefit of the Noteholders,
such title to the Trust Estate, or any part hereof, and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and trusts
as the Indenture Trustee may consider necessary or desirable. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 6.11 and no notice to Noteholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Indenture Trustee shall be conferred or imposed upon and exercised
or performed by the Indenture Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Indenture
Trustee joining in such act), except to the extent that under any law of
any jurisdiction in which any particular act or acts are to be performed
the Indenture Trustee shall be incompetent or unqualified to perform such
act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust Estate or any portion thereof
in any
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such jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Indenture
Trustee;
(ii) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation of
or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 6.11. Eligibility; Disqualification. The Indenture Trustee shall at
all times be a financial institution organized and doing business under the laws
of the United States of America or any state, be authorized under such laws to
exercise corporate trust powers, be subject to supervision and examination by
Federal or state authority, and have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition.
SECTION 6.12. Authorization Concerning the Account Agreement. The Indenture
Trustee is hereby authorized to enter into the Account Agreement.
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ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.01. Issuer To Furnish Indenture Trustee Names and Addresses of
Noteholders. The Issuer will furnish or cause to be furnished to the Indenture
Trustee (a) not more than five days after the earlier of (i) each Record Date
and (ii) three months after the last Record Date, a list, in such form as the
Indenture Trustee may reasonably require, of the names and addresses of the
Holders of Notes as of such Record Date, and (b) at such other times as the
Indenture Trustee may request in writing, within 30 days after receipt by the
Issuer of any such request, a list of similar form and content as of a date not
more than 10 days prior to the time such list is furnished; provided, however,
that so long as the Indenture Trustee is the Note Registrar, no such list shall
be required to be furnished.
SECTION 7.02. Preservation of Information; Communications to Noteholders.
(a) The Indenture Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Holders of Notes contained in the
most recent list furnished to the Indenture Trustee as provided in Section 7.01
and the names and addresses of Holders of Notes received by the Indenture
Trustee in its capacity as Note Registrar. The Indenture Trustee may destroy any
list furnished to it as provided in such Section 7.01 upon receipt of a new list
so furnished.
(b) Noteholders may communicate pursuant to TIA ss. 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have the
protection of TIA ss. 312(c).
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. Collection of Money. Except as otherwise expressly provided
herein, the Indenture Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
receivable by the Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it as provided in this Indenture.
Except as otherwise expressly provided in this Indenture, if any default occurs
in the making of any payment or performance under any agreement or instrument
that is part of the Trust Estate, the Indenture Trustee may take such action as
may be appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate Proceedings. Any such action shall be
without
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prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article V.
SECTION 8.02. Trust Accounts. (a) On or prior to the Closing Date, the
Issuer shall cause the Servicer to establish and maintain, in the name of the
Indenture Trustee, for the benefit of the Noteholders and the
Certificateholders, the Trust Accounts as provided in Section 5.01 of the Sale
and Servicing Agreement.
(b) On or before each Distribution Date, all amounts required to be
deposited in the Note Distribution Account with respect to the preceding
Collection Period pursuant to Sections 5.05 and 5.06 of the Sale and Servicing
Agreement will be transferred from the Collection Account and/or the Reserve
Account to the Note Distribution Account.
(c) On each Distribution Date and Redemption Date, the Indenture Trustee
shall distribute all amounts on deposit in the Note Distribution Account to
Noteholders in respect of the Notes to the extent of amounts due and unpaid on
the Notes for principal and interest (including any premium) in the following
amounts and in the following order of priority (except as otherwise provided in
Section 5.04(b)):
(i) to the Holders of the Notes, accrued and unpaid interest on the
Notes;
(ii) to the Holders of the Notes on account of principal until the
Outstanding Amount of the Notes is reduced to zero.
SECTION 8.03. General Provisions Regarding Accounts. (a) So long as no
Default or Event of Default shall have occurred and be continuing, all or a
portion of the funds in the Trust Accounts (other than the Note Distribution
Account) shall be invested in Eligible Investments and reinvested by the
Indenture Trustee upon Issuer Order, subject to the provisions of Section
5.01(b) of the Sale and Servicing Agreement. All income or other gain from
investments of moneys deposited in the Trust Accounts (other than the Dealer
Reserve Account) shall be deposited by the Indenture Trustee in the Collection
Account, and any loss resulting from such investments shall be charged to such
account. All income and other gain from investment of monies in the Dealer
Reserve Account (net of any losses and investment expenses) will be payable on
each Distribution Date to the Depositor. The Issuer will not direct the
Indenture Trustee to make any investment of any funds or to sell any investment
held in any of the Trust Accounts unless the security interest Granted and
perfected in such account will continue to be perfected in such investment or
the proceeds of such sale, in either case without any further action by any
Person, and, in connection with any direction to the Indenture Trustee to make
any such investment or sale, if requested by the Indenture Trustee, the Issuer
shall deliver to
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the Indenture Trustee an Opinion of Counsel, acceptable to the Indenture
Trustee, to such effect.
(b) Subject to Section 6.01(c), the Indenture Trustee shall not in any way
be held liable by reason of any insufficiency in any of the Trust Accounts
resulting from any loss on any Eligible Investment included therein except for
losses attributable to the Indenture Trustee's failure to make payments on such
Eligible Investments issued by the Indenture Trustee, in its commercial capacity
as principal obligor and not as trustee, in accordance with their terms.
(c) If (i) the Issuer (or the Servicer) shall have failed to give
investment directions for any funds on deposit in the Trust Accounts to the
Indenture Trustee by 10:00 a.m. Eastern Time (or such other time as may be
agreed by the Issuer and Indenture Trustee) on any Business Day or (ii) a
Default or Event of Default shall have occurred and be continuing with respect
to the Notes but the Notes shall not have been declared due and payable pursuant
to Section 5.02 or (iii) if such Notes shall have been declared due and payable
following an Event of Default and amounts collected or received from the Trust
Estate are being applied in accordance with Section 5.05 as if there had not
been such a declaration, then the Indenture Trustee shall, to the fullest extent
practicable, invest and reinvest funds in the Trust Accounts in one or more
Eligible Investments.
SECTION 8.04. Release of Trust Estate. (a) Subject to the payment of its
fees and expenses pursuant to Section 6.07, the Indenture Trustee may, and when
required by the provisions of this Indenture shall, execute instruments to
release property from the lien of this Indenture, or convey the Indenture
Trustee's interest in the same, in a manner and under circumstances that are not
inconsistent with the provisions of this Indenture. No party relying upon an
instrument executed by the Indenture Trustee as provided in this Article VIII
shall be bound to ascertain the Indenture Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
moneys.
(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due the Indenture Trustee pursuant to Section 6.07 have
been paid, release any remaining portion of the Trust Estate that secured the
Notes from the lien of this Indenture and release to the Issuer or any other
Person entitled thereto any funds then on deposit in the Trust Accounts. The
Indenture Trustee shall release property from the lien of this Indenture
pursuant to this Section 8.04(b) only upon receipt of an Issuer Request
accompanied by an Officer's Certificate and an Opinion of Counsel meeting the
applicable requirements of Section 11.01.
SECTION 8.05. Opinion of Counsel. The Indenture Trustee shall receive at
least seven days notice when requested by the Issuer to take any action pursuant
to Section 8.04(a),
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accompanied by copies of any instruments involved, and the Indenture Trustee
shall also require, as a condition to such action, an Opinion of Counsel, in
form and substance satisfactory to the Indenture Trustee, stating the legal
effect of any such action, outlining the steps required to complete the same,
and concluding that all conditions precedent to the taking of such action have
been complied with and such action will not materially and adversely impair the
security for the Notes or the rights of the Noteholders in contravention of the
provisions of this Indenture; provided, however, that such Opinion of Counsel
shall not be required to express an opinion as to the fair value of the Trust
Estate. Counsel rendering any such opinion may rely, without independent
investigation, on the accuracy and validity of any certificate or other
instrument delivered to the Indenture Trustee in connection with any such
action.
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent of Noteholders. (a)
Without the consent of the Holders of any Notes but with prior notice to the
Rating Agencies, the Issuer and the Indenture Trustee, when authorized by an
Issuer Order, at any time and from time to time, may enter into one or more
indentures supplemental hereto, in form satisfactory to the Indenture Trustee,
for any of the following purposes:
(i) to correct or amplify the description of any property at any time
subject to the lien of this Indenture, or better to assure, convey and
confirm unto the Indenture Trustee any property subject or required to be
subjected to the lien of this Indenture, or to subject to the lien of this
Indenture additional property;
(ii) to evidence the succession, in compliance with the applicable
provisions hereof, of another person to the Issuer, and the assumption by
any such successor of the covenants of the Issuer herein and in the Notes
contained;
(iii) to add to the covenants of the Issuer, for the benefit of the
Holders of the Notes, or to surrender any right or power herein conferred
upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property to
or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture that may be inconsistent with any
other provision herein or in any supplemental indenture or to make any
other provisions with respect to matters or questions arising under this
Indenture or in any supplemental indenture; provided, that such action
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shall not adversely affect the interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the appointment
hereunder by a successor trustee with respect to the Notes and to add to or
change any of the provisions of this Indenture as shall be necessary to
facilitate the administration of the trusts hereunder by more than one
trustee, pursuant to the requirements of Article VI; or
(vii) if required by law, to modify, eliminate or add to the
provisions of this Indenture to such extent as shall be necessary to effect
the qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such other
provisions as may be expressly required by the TIA.
The Indenture Trustee is hereby authorized to join in the execution of any such
supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Holders of the Notes but with
prior notice to the Rating Agencies, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the interests of
any Noteholder.
SECTION 9.02. Supplemental Indentures with Consent of Noteholders. The
Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may,
with prior notice to the Rating Agencies and with the consent of the Holders of
not less than a majority of the Outstanding Amount of the Notes, by Act of such
Holders delivered to the Issuer and the Indenture Trustee, enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Holders of
the Notes under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Note
affected thereby:
(i) change the date of payment of any installment of principal of or
interest on any Note, or reduce the principal amount thereof, the interest
rate thereon or the Redemption Price with respect thereto, change the
provisions of this Indenture relating to the application of collections on,
or the proceeds of the sale of, the Trust Estate to payment of principal of
or interest on the Notes, or change any place of
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payment where, or the coin or currency in which, any Note or the interest
thereon is payable, or impair the right to institute suit for the
enforcement of the provisions of this Indenture requiring the application
of funds available therefor, as provided in Article V, to the payment of
any such amount due on the Notes on or after the respective due dates
thereof (or, in the case of redemption, on or after the Redemption Date);
(ii) reduce the percentage of the Outstanding Amount of the Notes, the
consent of the Holders of which is required for any such supplemental
indenture, or the consent of the Holders of which is required for any
waiver of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this Indenture;
(iii) modify or alter the provisions of the proviso to the definition
of the term "Outstanding";
(iv) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Indenture Trustee to direct the Issuer to sell or
liquidate the Trust Estate pursuant to Section 5.04;
(v) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the Basic Documents cannot be modified or
waived without the consent of the Holder of each Outstanding Note affected
thereby;
(vi) modify any of the provisions of this Indenture in such manner as
to affect the calculation of the amount of any payment of interest or
principal due on any Note on any Distribution Date (including the
calculation of any of the individual components of such calculation) or to
affect the rights of the Holders of Notes to the benefit of any provisions
for the mandatory redemption of the Notes contained herein; or
(vii) permit the creation of any lien ranking prior to or on a parity
with the lien of this Indenture with respect to any part of the Trust
Estate or, except as otherwise permitted or contemplated herein, terminate
the lien of this Indenture on any property at any time subject hereto or
deprive the Holder of any Note of the security provided by the lien of this
Indenture.
The Indenture Trustee may, but shall in no way be obligated to, in its sole
discretion determine whether or not any Notes would be affected by any
supplemental indenture and any such determination shall be conclusive upon the
Holders of all Notes, whether theretofore or thereafter authenticated and
delivered hereunder. The Indenture Trustee shall not be liable for any such
determination made in good faith.
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It shall not be necessary for any Act of Noteholders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of any
supplemental indenture pursuant to this Section, the Indenture Trustee shall
mail to the Holders of the Notes to which such amendment or supplemental
indenture relates a notice setting forth in general terms the substance of such
supplemental indenture. Any failure of the Indenture Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
SECTION 9.03. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.01 and 6.02, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture, which opinion shall be conclusive
evidence as to such authorization or permission. The Indenture Trustee may, but
shall not be obligated to, enter into any such supplemental indenture that
affects the Indenture Trustee's own rights, duties, liabilities or immunities
under this Indenture or otherwise.
SECTION 9.04. Effect of Supplemental Indenture. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and shall be deemed to be modified and amended in accordance therewith with
respect to the Notes affected thereby, and the respective rights, limitations of
rights, obligations, duties, liabilities and immunities under this Indenture of
the Indenture Trustee, the Issuer and the Holders of the Notes shall thereafter
be determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
SECTION 9.05. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
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ARTICLE X
Redemption of Notes
SECTION 10.01. Redemption. (a) The Notes are subject to redemption in
whole, but not in part, at the direction of the Servicer pursuant to Section
9.01(a) of the Sale and Servicing Agreement, on any Distribution Date on which
the Servicer exercises its option to purchase the Trust Estate pursuant to said
Section 9.01(a), for a purchase price equal to the Redemption Price; provided,
that the Issuer has available funds sufficient to pay the Redemption Price. The
Servicer or the Issuer shall furnish the Rating Agencies notice of such
redemption. If the Notes are to be redeemed pursuant to this Section 10.01(a),
the Servicer or the Issuer shall furnish notice of such election to the
Indenture Trustee not later than 20 days prior to the Redemption Date, and the
Issuer shall deposit by 10:00 A.M. New York City time on the Redemption Date
with the Indenture Trustee in the Note Distribution Account the Redemption Price
of the Notes to be redeemed, whereupon all such Notes shall be due and payable
on the Redemption Date upon the furnishing of a notice complying with Section
10.02 to each Holder of the Notes.
(b) In the event that the assets of the Trust are sold pursuant to Section
9.02 of the Trust Agreement, all amounts on deposit in the Note Distribution
Account shall be paid to the Noteholders up to the Outstanding Amount of the
Notes and all accrued and unpaid interest thereon. If amounts are to be paid to
Noteholders pursuant to this Section 10.01(b), the Servicer or the Issuer shall,
to the extent practicable, furnish notice of such event to the Indenture Trustee
not later than 20 days prior to the Redemption Date, whereupon all such amounts
shall be payable on the Redemption Date.
SECTION 10.02. Form of Redemption Notice. (a) Notice of redemption under
Section 10.01(a) shall be given by the Indenture Trustee by first-class mail,
postage prepaid, or by facsimile mailed or transmitted not later than 10 days
prior to the applicable Redemption Date to each Holder of Notes as of the close
of business on the Record Date preceding the applicable Redemption Date, at such
Holder's address or facsimile number appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price; and
(iii) the place where such Notes are to be surrendered for payment of the
Redemption Price.
Notice of redemption of the Notes shall be given by the Indenture Trustee in the
name and at the expense of the Issuer. Failure to
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give notice of redemption, or any defect therein, to any Holder of any Note
shall not impair or affect the validity of the redemption of any other Note.
(b) Prior notice of redemption under Section 10.01(b) is not required to be
given to Noteholders.
SECTION 10.03. Notes Payable on Redemption Date. The Notes or portions
thereof to be redeemed shall, following notice of redemption as required by
Section 10.02 (in the case of redemption pursuant to Section 10.01(a)), become
due and payable at the Redemption Price on the Redemption Date and (unless the
Issuer shall default in the payment of the Redemption Price) no interest shall
accrue on the Redemption Price for any period after the date to which accrued
interest is calculated for purposes of calculating the Redemption Price.
ARTICLE XI
Miscellaneous
SECTION 11.01. Compliance Certificates and Opinions, etc. Upon any
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the Indenture
Trustee (i) an Officer's Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have been
complied with, and (ii) an Opinion of Counsel stating that in the opinion of
such counsel all such conditions precedent, if any, have been complied with,
except that, in the case of any such application or request as to which the
furnishing of such documents is specifically required by any provision of this
Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate or opinion has
read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to
enable such signatory to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such signatory,
such condition or covenant has been complied with.
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SECTION 11.02. Form of Documents Delivered to Indenture Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such officer's certificate or opinion is
based are erroneous. Any such certificate of an Authorized Officer or Opinion of
Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Servicer, the Depositor, the Issuer or the Administrator, stating that the
information with respect to such factual matters is in the possession of the
Servicer, the Depositor, the Issuer or the Administrator, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.
SECTION 11.03. Acts of Noteholders. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Noteholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Noteholders in person
or by agents duly appointed in writing; and except as herein otherwise expressly
provided such action shall
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become effective when such instrument or instruments are delivered to the
Indenture Trustee and, where it is hereby expressly required, to the Issuer.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Noteholders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 6.01) conclusive in favor of
the Indenture Trustee and the Issuer, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any person of any such instrument
or writing may be proved in any manner that the Indenture Trustee deems
sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Notes shall bind the Holder of every Note
issued upon the registration thereof or in exchange therefor or in lieu thereof,
in respect of anything done, omitted or suffered to be done by the Indenture
Trustee or the Issuer in reliance thereon, whether or not notation of such
action is made upon such Note.
SECTION 11.04. Notices, etc., to Indenture Trustee, Issuer and Rating
Agencies. Any request, demand, authorization, direction, notice, consent, waiver
or Act of Noteholders or other documents provided or permitted by this Indenture
shall be in writing and if such request, demand, authorization, direction,
notice, consent, waiver or act of Noteholders is to be made upon, given or
furnished to or filed with:
(i) the Indenture Trustee by any Noteholder or by the Issuer shall be
sufficient for every purpose hereunder if made, given, furnished or filed
in writing to or with the Indenture Trustee at its Corporate Trust Office,
or
(ii) the Issuer by the Indenture Trustee or by any Noteholder shall be
sufficient for every purpose hereunder if in writing and personally
delivered or mailed postage prepaid or by recognized overnight courier or
by facsimile confirmed by delivery or mail as described above to the Issuer
addressed to: NAL Auto Trust 1996-3, in care of Wilmington Trust Company,
as Owner Trustee, 100 N. Market Street, Rodney Square North, Wilmington,
Delaware 19801; facsimile: 302-651-8882; Attention of Corporate Trust
Administrator, or at any other address previously furnished in writing to
the Indenture Trustee by the Issuer or the Administrator. The Issuer shall
promptly transmit any notice received by it from the Noteholders to the
Indenture Trustee.
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Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Owner Trustee shall be in writing, personally delivered
or mailed by certified mail, return receipt requested, to (i) in the case of
Fitch Investors Service, L.P., at the following address: One State Street Plaza,
New York, N.Y. 10004, and (ii) in the case of Duff & Phelps Credit Rating Co. at
the following address: 55 E. Monroe Street (35th Floor), Chicago, Illinois
60603; or as to each of the foregoing, at such other address as shall be
designated by written notice to the other parties.
SECTION 11.05. Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at such Holder's address as it appears on the Note Register, not later
than the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by any Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Noteholders shall be filed with the Indenture Trustee but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure to
give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event of
Default.
SECTION 11.06. Alternate Payment and Notice Provisions. Notwithstanding any
provision of this Indenture or any of the Notes to the contrary, the Issuer may
enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Indenture Trustee or any Paying Agent to such Holder,
that is different from the methods provided for in this Indenture for such
payments or notices. The Issuer will furnish to the Indenture Trustee a copy of
each such agreement and the
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Indenture Trustee will cause payments to be made and notices to be given in
accordance with such agreements.
SECTION 11.07. [Reserved]
SECTION 11.08. Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 11.09. Successors and Assigns. All covenants and agreements in this
Indenture and the Notes by the Issuer shall bind its successors and assigns,
whether so expressed or not. All agreements of the Indenture Trustee in this
Indenture shall bind its successors, co-trustees and agents.
SECTION 11.10. Separability. In case any provision in this Indenture or in
the Notes shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 11.11. Benefits of Indenture. Nothing in this Indenture or in the
Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Trust Estate, any benefit or any legal or equitable right, remedy or
claim under this Indenture.
SECTION 11.12. Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.13. Governing Law. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.14. Counterparts. This Indenture may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
SECTION 11.15. Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to
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the Indenture Trustee) to the effect that such recording is necessary either for
the protection of the Noteholders or any other Person secured hereunder or for
the enforcement of any right or remedy granted to the Indenture Trustee under
this Indenture.
SECTION 11.16. Trust Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Indenture Trustee on the Notes or under this Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or
of any successor or assign of the Indenture Trustee or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed in
writing (it being understood that the Indenture Trustee and the Owner Trustee
have no such obligations in their individual capacity) and except that any such
partner, owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity. For
all purposes of this Indenture, in the performance of any duties or obligations
of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to
the benefits of, the terms and provisions of Article VI, VII and VIII of the
Trust Agreement.
SECTION 11.17. No Petition. The Indenture Trustee, by entering into this
Indenture, and each Noteholder, by accepting a Note, hereby covenant and agree
that they will not at any time institute against the Depositor or the Issuer, or
join in any institution against the Depositor or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, this Indenture or any
of the Basic Documents.
SECTION 11.18. Inspection. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent certified public accountants,
and to discuss the Issuer's affairs, finances and accounts with the Issuer's
officers, employees and Independent certified public accountants, all at such
reasonable times and as often as may be reasonably requested. The Indenture
Trustee shall, and shall cause its representatives to, hold in confidence all
such information provided, however, that the foregoing shall not be construed to
prohibit (i) disclosure of any and all
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information that is or becomes publicly known, or information obtained by the
Indenture Trustee from sources other than the Issuer, Administrator, Seller or
Servicer, (ii) disclosure of any and all information (A) if required to do so by
any applicable statute, law, rule or regulation, (B) to any government agency or
regulatory or self-regulatory body having or claiming authority to regulate or
oversee any aspects of the Indenture Trustee's business or that of its
Affiliates, (C) pursuant to any subpoena, civil investigative demand or similar
demand or request of any court, regulatory authority, arbitrator or arbitration
to which the Indenture Trustee or an Affiliate or an officer, director, employer
or shareholder thereof is a party, (D) in any preliminary or final offering
circular, registration statement or contract or other document pertaining to the
transactions contemplated by this Agreement approved in advance by the Issuer or
(E) to any Affiliate, independent or internal auditor, agent, employee or
attorney of the Indenture Trustee having a need to know the same, provided that
the Indenture Trustee advises such recipient of the confidential nature of the
information being disclosed, (iii) any other disclosure authorized by the
Seller, Administrator, Issuer or Servicer or (iv) disclosure to the other
parties to the transactions contemplated by this Agreement.
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IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused this
Indenture to be duly executed by their respective officers, thereunto duly
authorized and duly attested, all as of the day and year first above written.
NAL AUTO TRUST 1996-3,
by: WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee,
by:___________________________________
Name: Emmett R. Harmon
Title: Vice President
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as Indenture Trustee,
by:___________________________________
Name:
Title:
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STATE OF NEW YORK }
} ss.:
COUNTY OF NEW YORK }
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared Emmett R. Harmon, known to me
to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of the said NAL AUTO
TRUST 1996-3, a Delaware business trust, and that he executed the same as the
act of said business trust for the purpose and consideration therein expressed,
and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 27th day of September, 1996.
________________________________________________________________________________
Notary Public in and for the State of New York.
My commission expires:
____________________________________
<PAGE>
STATE OF NEW YORK }
} ss.:
COUNTY OF NEW YORK }
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared Lara Graff, known to me to be
the person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of BANKERS TRUST COMPANY, a New
York banking corporation, and that she executed the same as the act of said
corporation for the purpose and consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 27th day of September, 1996.
________________________________________________________________________________
Notary Public in and for the State of New York.
My commission expires:
____________________________________
<PAGE>
SCHEDULE 1
<PAGE>
EXHIBIT A
[FORM OF NOTE]
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR UNDER THE SECURITIES OR BLUE SKY LAWS OF
ANY STATE IN THE UNITED STATES OR ANY FOREIGN SECURITIES LAWS. BY ITS ACCEPTANCE
OF THIS NOTE THE HOLDER HEREOF IS DEEMED TO REPRESENT TO THE DEPOSITOR AND THE
INDENTURE TRUSTEE (i) THAT IT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) OF REGULATION D PROMULGATED UNDER THE 1933 ACT (AN
"ACCREDITED INVESTOR") AND THAT IT IS ACQUIRING THIS NOTE FOR ITS OWN ACCOUNT
(AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH
OTHERS ALSO ARE ACCREDITED INVESTORS UNLESS THE HOLDER IS A BANK ACTING IN ITS
FIDUCIARY CAPACITY) FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE
IN CONNECTION WITH, THE PUBLIC DISTRIBUTION HEREOF OR (ii) THAT IT IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE 1933 ACT AND
IS ACQUIRING SUCH NOTE FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS)
OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS ALSO ARE QUALIFIED
INSTITUTIONAL BUYERS).
NO SALE, PLEDGE OR OTHER TRANSFER OF THIS NOTE MAY BE MADE BY ANY PERSON UNLESS
EITHER (i) SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE TO THE DEPOSITOR, (ii)
SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE TO AN ACCREDITED INVESTOR THAT
EXECUTES A CERTIFICATE, SUBSTANTIALLY IN THE FORM SPECIFIED IN THE INDENTURE, TO
THE EFFECT THAT IT IS AN ACCREDITED INVESTOR ACTING FOR ITS OWN ACCOUNT (AND NOT
FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS
ALSO ARE ACCREDITED INVESTORS UNLESS THE HOLDER IS A BANK ACTING IN ITS
FIDUCIARY CAPACITY), (iii) SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT
TO RULE 144A UNDER THE 1933 ACT, SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE TO
A PERSON WHO THE PROSPECTIVE TRANSFEROR REASONABLY BELIEVES AFTER DUE INQUIRY IS
A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A), ACTING FOR ITS OWN
ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR
OTHERS (WHICH OTHERS ALSO ARE QUALIFIED INSTITUTIONAL BUYERS) TO WHOM NOTICE IS
GIVEN THAT THE SALE, PLEDGE OR TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A,
OR (iv) SUCH SALE, PLEDGE OR OTHER TRANSFER IS OTHERWISE MADE IN A TRANSACTION
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT, IN WHICH CASE THE
INDENTURE TRUSTEE SHALL REQUIRE THAT BOTH THE PROSPECTIVE TRANSFEROR AND THE
PROSPECTIVE TRANSFEREE CERTIFY TO THE INDENTURE TRUSTEE AND THE DEPOSITOR IN
WRITING THE FACTS SURROUNDING SUCH TRANSFER, WHICH CERTIFICATION SHALL BE IN
FORM AND SUBSTANCE SATISFACTORY TO THE INDENTURE TRUSTEE AND THE DEPOSITOR.
EXCEPT IN THE CASE OF A TRANSFER DESCRIBED IN CLAUSES (i) OR (iii) ABOVE, THE
INDENTURE TRUSTEE SHALL REQUIRE A WRITTEN OPINION OF COUNSEL (WHICH SHALL NOT BE
AT THE EXPENSE OF THE DEPOSITOR, ANY AFFILIATE OF THE DEPOSITOR OR THE INDENTURE
TRUSTEE) SATISFACTORY TO THE DEPOSITOR AND THE INDENTURE TRUSTEE TO THE EFFECT
THAT SUCH TRANSFER WILL NOT VIOLATE THE 1933 ACT.
A-1
<PAGE>
NO SALE, PLEDGE OR OTHER TRANSFER MAY BE MADE TO ANY ONE PERSON FOR SECURITIES
WITH A FACE AMOUNT OF LESS THAN $100,000 AND, IN THE CASE OF ANY PERSON ACTING
ON BEHALF OF ONE OR MORE THIRD PARTIES (OTHER THAN A BANK (AS DEFINED IN SECTION
3(a)(2) OF THE 1933 ACT) ACTING IN ITS FIDUCIARY CAPACITY), FOR SECURITIES WITH
A FACE AMOUNT OF LESS THAN $100,000 FOR EACH SUCH THIRD PARTY.
SECTION 2.04 OF THE INDENTURE CONTAINS FURTHER RESTRICTIONS ON THE TRANSFER AND
RESALE OF THIS NOTE. EACH TRANSFEREE OF THIS NOTE, BY ACCEPTANCE HEREOF, IS
DEEMED TO HAVE ACCEPTED THIS NOTE SUBJECT TO THE FOREGOING RESTRICTIONS ON
TRANSFERABILITY.
EACH NOTEHOLDER OR NOTE OWNER, BY ITS ACCEPTANCE OF THIS SECURITY, COVENANTS AND
AGREES THAT SUCH NOTEHOLDER OR NOTE OWNER SHALL NOT, PRIOR TO THE DATE THAT IS
ONE YEAR AND ONE DAY AFTER THE TERMINATION OF THE TRUST AGREEMENT, ACQUIESCE,
PETITION OR OTHERWISE INVOKE OR CAUSE THE TRUST, THE DEPOSITOR OR THE SELLER TO
INVOKE THE PROCESS OF ANY COURT OR GOVERNMENTAL AUTHORITY FOR THE PURPOSE OF
COMMENCING OR SUSTAINING A CASE AGAINST THE TRUST, THE DEPOSITOR OR THE SELLER
UNDER ANY FEDERAL OR STATE BANKRUPTCY, INSOLVENCY, REORGANIZATION OR SIMILAR
LAW, OR APPOINTING A RECEIVER, LIQUIDATOR, ASSIGNEE, TRUSTEE, CUSTODIAN,
SEQUESTRATOR OR OTHER SIMILAR OFFICIAL OF THE TRUST, THE DEPOSITOR OR THE SELLER
OR ANY SUBSTANTIAL PART OF ITS PROPERTY, OR ORDERING THE WINDING UP OR
LIQUIDATION OF THE AFFAIRS OF THE TRUST, THE DEPOSITOR OR THE SELLER.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
[UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]
REGISTERED $________________
No. R- CUSIP NO. 628948 AG 6
NAL AUTO TRUST 1996-3
7.30% ASSET BACKED NOTES
NAL Auto Trust 1996-3, a business trust organized and existing under the
laws of the State of Delaware (herein referred
A-2
<PAGE>
to as the "Issuer"), for value received, hereby promises to pay to
_______________________________, or registered assigns, the principal sum of
_______________________ DOLLARS payable on each Distribution Date in an amount
equal to the result obtained by multiplying (i) a fraction the numerator of
which is $__________ and the denominator of which is $63,047,000 by (ii) the
aggregate amount, if any, payable from the Note Distribution Account in respect
of principal on the Notes pursuant to Section 3.01 of the Indenture dated as of
September 11, 1996 (the "Indenture"), between the Issuer and Bankers Trust
Company, a New York banking corporation, as Indenture Trustee (the "Indenture
Trustee"); provided, however, that the entire unpaid principal amount of this
Note shall be due and payable on the earlier of the December 15, 2000
Distribution Date (the "Note Final Scheduled Distribution Date") and the
Redemption Date, if any, pursuant to Section 10.01 of the Indenture. Capitalized
terms used but not defined herein are defined in Article I of the Indenture,
which also contains rules as to construction that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum shown
above on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (or, in the case of the first Distribution Date, the
Closing Date) after giving effect to all payments of principal made on the
preceding Distribution Date, subject to certain limitations contained in Section
3.01 of the Indenture. Interest on this Note for each Distribution Date will
accrue from and including the first day of the preceding Collection Period (or,
in the case of the first Distribution Date, from and including the Cutoff Date).
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture, or be valid or obligatory
for any purpose.
A-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: _________________ NAL AUTO TRUST 1996-3,
by: WILMINGTON TRUST COMPANY, not in
its individual capacity but
solely as Owner Trustee under the
Trust Agreement,
by:__________________________________
Authorized Signatory
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: _________________ BANKERS TRUST COMPANY, not
in its individual capacity
but solely as Indenture
Trustee,
by:__________________________________
Authorized Signatory
A-4
<PAGE>
Reverse
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its 7.30% Asset Backed Notes (herein called the "Notes"), all
issued under the Indenture, to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights and
obligations thereunder of the Issuer, the Indenture Trustee and the Holders of
the Notes. The Notes are subject to all terms of the Indenture.
The Notes are and will be equally and ratably secured by the collateral
pledged as security therefor as provided in the Indenture.
Principal of the Notes will be payable on each Distribution Date in an
amount described on the face hereof. "Distribution Date" means the 15th day of
each March, June, September and December or, if any such date is not a Business
Day, the next succeeding Business Day, commencing December 1996.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the Note Final Scheduled Distribution Date
and the Redemption Date, if any, pursuant to Section 10.01 of the Indenture.
Notwithstanding the foregoing, the entire unpaid principal amount of the Notes
shall be due and payable on the date on which an Event of Default shall have
occurred and be continuing and the Indenture Trustee or the Holders of Notes
representing not less than a majority of the Outstanding Amount of the Notes
have declared the Notes to be immediately due and payable in the manner provided
in Section 5.02 of the Indenture. All principal payments on the Notes shall be
made pro rata to the Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
unless either (i) such Person notifies the Paying Agent in writing not later
than the Record Date prior to a Distribution Date or (ii) the Registered Holder
of this Note is the nominee of the Clearing Agency, in which case, payments are
to be made by wire transfer in immediately available funds to the account
designated by such Person. Payments by check shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Distribution Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as
A-5
<PAGE>
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Distribution Date, then the Indenture
Trustee, in the name of and on behalf of the Issuer, will notify the Person who
was the Registered Holder hereof as of the Record Date preceding such
Distribution Date by notice mailed or transmitted by facsimile prior to such
Distribution Date, and the amount then due and payable shall be payable only
upon presentation and surrender of this Note at the Indenture Trustee's
principal Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of interest at the
Note Rate to the extent lawful.
As provided in the Indenture and subject to the limitations set forth
therein and on the face hereof, the transfer of this Note may be registered on
the Note Register upon surrender of this Note for registration of transfer at
the office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, with such signature
guaranteed by an "eligible guarantor institution" meeting the requirements of
the Note Registrar, which requirements include membership or participation in
the Securities Transfer Agent's Medallion Program ("STAMP") or such other
"signature guarantee program" as may be determined by the Note Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended, and thereupon one or more new Notes
of authorized denominations and in the same aggregate principal amount will be
issued to the designated transferee or transferees. No service charge will be
charged for any registration of transfer or exchange of this Note, but the
transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note, covenants and
agrees that no recourse may be taken, directly or indirectly, with respect to
the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Indenture Trustee or the Owner Trustee in
its individual capacity, (ii) any owner of a beneficial interest in the Issuer
or (iii) any partner, owner, beneficiary, agent, officer, director or employee
of the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law,
A-6
<PAGE>
for any unpaid consideration for stock, unpaid capital contribution or failure
to pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note covenants and
agrees by accepting the benefits of the Indenture that such Noteholder will not
at any time institute against the Depositor, the Seller or the Issuer, or join
in any institution against the Depositor, the Seller or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
under any United States federal or state bankruptcy or similar law in connection
with any obligations relating to the Notes, the Indenture or the Basic
Documents.
The Issuer has entered into the Indenture and this Note is issued with
the intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder or Note Owner, by acceptance of a
Note, agrees to treat the Notes for federal, state and local income, single
business and franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
A-7
<PAGE>
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of Wilmington Trust Company in its
individual capacity, Bankers Trust Company in its individual capacity, any owner
of a beneficial interest in the Issuer, or any of their respective partners,
beneficiaries, agents, officers, directors, employees or successors or assigns
shall be personally liable for, nor shall recourse be had to any of them for,
the payment of principal of or interest on this Note or performance of, or
failure to perform, any of the covenants, obligations or indemnifications
contained in the Indenture. The Holder of this Note by its acceptance hereof
agrees that, except as expressly provided in the Basic Documents, in the case of
an Event of Default under the Indenture, the Holder shall have no claim against
any of the foregoing for any deficiency, loss or claim therefrom; provided,
however, that nothing contained herein shall be taken to prevent recourse to,
and enforcement against, the assets of the Issuer for any and all liabilities,
obligations and undertakings contained in the Indenture or in this Note.
A-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
________________________________________________________________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
________________________________________________________________________________
________________________________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints ___________________________________________________________________
_____________________________________, attorney, to transfer said Note on the
books kept for registration thereof, with full power of substitution in the
premises.
Dated:___________________ __________________________________*/
Signature Guaranteed:
__________________________________*/
- ----------
*/ NOTICE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Note Registrar, which requirements include
membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act
of 1934, as amended.
A-9
<PAGE>
EXHIBIT B
[RESERVED]
B-1
<PAGE>
EXHIBIT C
FORM OF TRANSFEROR CERTIFICATE
[DATE]
[Depositor]
[Depositor Address]
[Owner Trustee]
[Owner Trustee Address]
[Indenture Trustee]
[Indenture Trustee Address]
Re: NAL Auto Trust 1996-3
7.30% Asset Backed Notes
Ladies and Gentlemen:
In connection with our disposition of the above-referenced 7.30% Asset
Backed Notes (the "Notes") we certify that (a) we understand that the Notes have
not been registered under the Securities Act of 1933, as amended (the "Act"),
and are being transferred by us in a transaction that is exempt from the
registration requirements of the Act and (b) we have not offered or sold any
Notes to, or solicited offers to buy any Notes from, any person, or otherwise
approached or negotiated with any person with respect thereto, in a manner that
would be deemed, or taken any other action which would result in, a violation of
Section 5 of the Act.
Very truly yours,
[NAME OF TRANSFEROR]
By:_______________________________
Authorized Officer
C-1
<PAGE>
EXHIBIT D
FORM OF INVESTMENT LETTER
Autorics II, Inc.
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, Florida 33309
Wilmington Trust Company, as Owner Trustee
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Bankers Trust Company
4 Albany Street
New York, New York 10006
Ladies and Gentlemen:
In connection with our proposed purchase of $ aggregate principal
amount of 7.30% Asset Backed Notes (the "Securities") of NAL Auto Trust 1996-3
(the "Issuer"), we confirm that:
1. We understand that the Securities have not been registered under
the Securities Act of 1933, as amended (the "1933 Act"), and may not be
sold except as permitted in the following sentence. We understand and
agree, on our own behalf and on behalf of any accounts for which we are
acting as hereinafter stated, (x) that such Securities are being offered
only in a transaction not involving any public offering within the meaning
of the 1933 Act and (y) that such Securities may be resold, pledged or
transferred only (i) to the Depositor, (ii) to an "accredited investor" as
defined in Rule 501(a)(1), (2), (3) or (7) (an "Accredited Investor")
under the 1933 Act acting for its own account (and not for the account of
others) or as a fiduciary or agent for others (which others also are
Accredited Investors unless the holder is a bank acting in its fiduciary
capacity) that executes a certificate substantially in the form hereof,
(iii) so long as such Security is eligible for resale pursuant to Rule
144A under the 1933 Act ("Rule 144A"), to a person whom we reasonably
believe after due inquiry is a "qualified institutional buyer" as defined
in Rule 144A, acting for its own account (and not for the account of
others) or as a fiduciary or agent for others (which others also are
"qualified institutional buyers") to whom notice is given that the resale,
pledge or transfer is being made in reliance on Rule 144A or (iv) in a
sale, pledge or other transfer made in a transaction otherwise exempt from
the registration requirements of the 1933 Act, in which case, the
Indenture Trustee shall require that both the prospective transferor and
the prospective transferee
D-1
<PAGE>
certify to the Indenture Trustee and the Depositor in writing the facts
surrounding such transfer, which certification shall be in form and
substance satisfactory to the Indenture Trustee and the Depositor. Except
in the case of (i) or (iii), the Indenture Trustee shall require a written
opinion of counsel (which will not be at the expense of the Depositor, any
affiliate of the Depositor or the Indenture Trustee) which is satisfactory
to the Depositor and the Indenture Trustee be delivered to the Indenture
Trustee and the Depositor to the effect that such transfer will not
violate the 1933 Act, in each case in accordance with any applicable
securities laws of any state of the United States. We will notify any
purchaser of the Security from us of the above resale restrictions, if
then applicable. We further understand that in connection with any
transfer of the Security by us that the Depositor and the Indenture
Trustee may request, and if so requested we will furnish such certificates
and other information as they may reasonably require to confirm that any
such transfer complies with the foregoing restrictions. We understand that
no sale, pledge or other transfer may be made to any one person of
Securities with a face amount of less than $100,000 and, in the case of
any person acting on behalf of one or more third parties (other than a
bank (as defined in Section 3(a)((2) of the 1933 Act) acting in its
fiduciary capacity), of Securities with a face amount of less than
$100,000 for each such third party.
2. [CHECK ONE]
|_| (a) We are an "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act) acting for our own account (and not for
the account of others) or as a fiduciary or agent for
others (which others also are Accredited Investors
unless we are a bank acting in its fiduciary capacity).
We have such knowledge and experience in financial and
business matters as to be capable of evaluating the
merits and risks of our investment in the Security, and
we and any accounts for which we are acting are each
able to bear the economic risk of our or their
investment for an indefinite period of time. We are
acquiring the Security for investment and not with a
view to, or for offer and sale in connection with, a
public distribution.
|_| (b) We are a "qualified institutional buyer" as
defined under Rule 144A under the 1933 Act and are
acquiring the Security for our own account (and not for
the account of others) or as a fiduciary or agent for
others (which others also are "qualified institutional
buyers"). We are familiar with Rule 144A under the
1933 Act and are aware that the seller of the Security
and other parties intend to rely on the statements made
D-2
<PAGE>
herein and the exemption from the registration requirements
of the 1933 Act provided by Rule 144A.
3. We understand that the Depositor, the Trust, Greenwich Capital
Markets, Inc. ("Greenwich") and others will rely upon the truth and
accuracy of the foregoing acknowledgments, representations and agreements,
and we agree that if any of the acknowledgments, representations and
warranties deemed to have been made by us by our purchase of the
Securities, for our own account or for one or more accounts as to each of
which we exercise sole investment discretion, are no longer accurate, we
shall promptly notify the Depositor and Greenwich.
4. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party
in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
[NAME OF PURCHASER]
By: ____________________________
Name:
Title:
Date: __________________________
D-3
<PAGE>
EXHIBIT E
FORM OF DEPOSITORY AGREEMENT
E-1
EXECUTION COPY
================================================================================
TRUST AGREEMENT
between
AUTORICS II, INC.,
as Depositor,
and
WILMINGTON TRUST COMPANY,
as Owner Trustee
Dated as of September 11, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
SECTION 1.01. Capitalized Terms...................................... 1
SECTION 1.02. Other Definitional Provisions.......................... 3
ARTICLE II
Organization
SECTION 2.01. Name................................................... 4
SECTION 2.02. Office................................................. 4
SECTION 2.03. Purposes and Powers.................................... 4
SECTION 2.04. Appointment of Owner Trustee........................... 5
SECTION 2.05. Initial Capital Contribution of Owner Trust
Estate............................................... 5
SECTION 2.06. Declaration of Trust................................... 5
SECTION 2.07. Liability of the Owners................................ 6
SECTION 2.08. Title to Trust Property................................ 7
SECTION 2.09. Situs of Trust......................................... 7
SECTION 2.10. Representations and Warranties of the
Depositor............................................ 7
SECTION 2.11. Maintenance of the Demand Note......................... 8
SECTION 2.12. Federal Income Tax Provisions.......................... 8
ARTICLE III
Trust Certificates and Transfer of Interests
SECTION 3.01. Initial Ownership...................................... 8
SECTION 3.02. The Trust Certificates................................. 8
SECTION 3.03. Authentication of Trust Certificates................... 9
SECTION 3.04. Registration of Transfer and Exchange of
Trust Certificates................................... 9
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust
Certificates......................................... 11
SECTION 3.06. Persons Deemed Owners.................................. 12
SECTION 3.07. Access to List of Certificateholders' Names
and Addresses........................................ 12
SECTION 3.08. Maintenance of Office or Agency........................ 12
SECTION 3.09. Appointment of Paying Agent............................ 13
SECTION 3.10. Ownership by Depositor of Trust
Certificates......................................... 13
i
<PAGE>
ARTICLE IV
Actions by Owner Trustee
SECTION 4.01. Prior Notice to Owners with Respect to
Certain Matters...................................... 14
SECTION 4.02. Action by Owners with Respect to Certain
Matters.............................................. 14
SECTION 4.03. Action by Owners with Respect to Bankruptcy............ 15
SECTION 4.04. Restrictions on Owners' Power.......................... 15
SECTION 4.05. Majority Control....................................... 15
ARTICLE V
Application of Trust Funds; Certain Duties
SECTION 5.01. Establishment of Trust Account......................... 15
SECTION 5.02. Application of Trust Funds............................. 16
SECTION 5.03. Method of Payment...................................... 16
SECTION 5.04. No Segregation of Moneys; No Interest.................. 16
SECTION 5.05. Accounting and Reports to the Noteholders,
Owners, the Internal Revenue Service and
Others............................................... 16
SECTION 5.06. Signature on Returns................................... 17
ARTICLE VI
Authority and Duties of Owner Trustee
SECTION 6.01. General Authority...................................... 17
SECTION 6.02. General Duties......................................... 17
SECTION 6.03. Action upon Instruction................................ 18
SECTION 6.04. No Duties Except as Specified in this
Agreement or in Instructions......................... 19
SECTION 6.05. No Action Except Under Specified Documents
or Instructions...................................... 19
SECTION 6.06. Restrictions........................................... 19
ARTICLE VII
Concerning the Owner Trustee
SECTION 7.01. Acceptance of Trusts and Duties........................ 19
SECTION 7.02. Furnishing of Documents................................ 21
SECTION 7.03. Representations and Warranties......................... 21
SECTION 7.04. Reliance; Advice of Counsel............................ 21
SECTION 7.05. Not Acting in Individual Capacity...................... 22
SECTION 7.06. Owner Trustee Not Liable for Trust
Certificates or Receivables.......................... 22
SECTION 7.07. Owner Trustee May Own Trust Certificates and
Notes................................................ 23
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ARTICLE VIII
Compensation of Owner Trustee
SECTION 8.01. Owner Trustee's Fees and Expenses...................... 23
SECTION 8.02. Indemnification........................................ 23
SECTION 8.03. Payments to the Owner Trustee.......................... 24
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement......................... 24
SECTION 9.02. Dissolution upon Bankruptcy of the
Depositor............................................ 25
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.01. Eligibility Requirements for Owner Trustee............. 26
SECTION 10.02. Resignation or Removal of Owner Trustee................ 26
SECTION 10.03. Successor Owner Trustee................................ 27
SECTION 10.04. Merger or Consolidation of Owner Trustee............... 28
SECTION 10.05. Appointment of Co-Trustee or Separate
Trustee.............................................. 28
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments............................. 29
SECTION 11.02. No Legal Title to Owner Trust Estate in
Owners............................................... 31
SECTION 11.03. Limitations on Rights of Others........................ 31
SECTION 11.04. Notices................................................ 31
SECTION 11.05. Severability........................................... 32
SECTION 11.06. Separate Counterparts.................................. 32
SECTION 11.07. Successors and Assigns................................. 32
SECTION 11.08. Covenants of the Depositor............................. 32
SECTION 11.09. No Petition............................................ 32
SECTION 11.10. No Recourse............................................ 33
SECTION 11.11. Headings............................................... 33
SECTION 11.12. GOVERNING LAW.......................................... 33
SECTION 11.13. [Reserved.]............................................ 33
SECTION 11.14. Depositor Payment Obligation........................... 33
EXHIBIT A Form of Trust Certificate
EXHIBIT B Form of Certificate of Trust
EXHIBIT C Form of Transferor Certificate
EXHIBIT D Form of Investment Letter
ANNEX A Tax Partnership Provisions
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TRUST AGREEMENT dated as of September 11, 1996, between AUTORICS II, INC.,
a Delaware corporation, as depositor (the "Depositor") and WILMINGTON TRUST
COMPANY, a Delaware banking corporation, as owner trustee (the "Owner
Trustee").
ARTICLE I
Definitions
SECTION 1.01. Capitalized Terms. For all purposes of this Agreement, the
following terms shall have the meanings set forth below:
"Administration Agreement" shall mean the Administration Agreement dated as
of September 11, 1996, among the Trust, the Indenture Trustee and NAL Acceptance
Corporation, as Administrator.
"Agreement" shall mean this Trust Agreement, as the same may be amended and
supplemented from time to time.
"Basic Documents" shall mean the Sale and Servicing Agreement, the
Indenture, the Administration Agreement, the Custodial Agreement and the other
documents, instruments and certificates delivered in connection therewith.
"Benefit Plan" shall have the meaning assigned to such term in Section
3.04.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code ss. 3801 et seq., as the same may be amended from time to
time.
"Certificate Distribution Account" shall have the meaning assigned to such
term in Section 5.01.
"Certificate of Trust" shall mean the Certificate of Trust in the form of
Exhibit B filed for the Trust pursuant to Section 3810(a) of the Business Trust
Statute.
"Certificate Register" and "Certificate Registrar" shall mean the register
mentioned in and the registrar appointed pursuant to Section 3.04.
"Certificateholder" or "Holder" shall mean a Person in whose name a Trust
Certificate is registered.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the Owner Trustee, the
principal corporate trust office of the Owner Trustee located at 1100 N. Market
Street, Rodney Square North, Wilmington, DE 19890, Attn: Corporate Trust
Administration, or at such other
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address as the Owner Trustee may designate by notice to the Owners and the
Depositor, or the principal corporate trust office of any successor Owner
Trustee at the address designated by such successor Owner Trustee by notice to
the Owners and the Depositor.
"Custodial Agreement" shall mean the Custodial Agreement dated as of
September 11, 1996, between the Trust and Bankers Trust Company, as Custodian.
"Demand Note" shall mean, in the case of the Depositor, the Demand Note
dated September 27, 1996, from NAL to the Depositor.
"Depositor" shall mean AUTORICS II, Inc. in its capacity as depositor
hereunder.
"Depositor's Interest" shall mean the Trust Certificate owned by the
Depositor evidencing (i) a not less than 1% undivided interest in the
Certificate Balance and interest at the Pass-Through Rate and (ii) all other
amounts in respect of the Trust property to which the Depositor is entitled
hereunder.
"ERISA" shall have the meaning assigned thereto in Section 3.04.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Expenses" shall have the meaning assigned to such term in Section 8.02.
"Indemnified Parties" shall have the meaning assigned to such term in
Section 8.02.
"Indenture" shall mean the Indenture dated as of September 11, 1996 between
the Trust and Bankers Trust Company, as Indenture Trustee.
"Initial Certificate Balance" shall mean $7,005,423.84.
"NAL" shall mean NAL Acceptance Corporation, a Florida Corporation, and any
successor in interest.
"Owner" shall mean each Holder of a Trust Certificate.
"Owner Trust Estate" shall mean all right, title and interest of the Trust
in and to the property and rights assigned to the Trust pursuant to Article II
of the Sale and Servicing Agreement, all funds on deposit from time to time in
the Trust Accounts and the Certificate Distribution Account and all other
property of the Trust from time to time, including any rights of the Owner
Trustee and the Trust pursuant to the Sale and Servicing Agreement and the
Administration Agreement.
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"Owner Trustee" shall mean Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as owner trustee under
this Agreement, and any successor Owner Trustee hereunder.
"Paying Agent" shall mean any paying agent or co-paying agent appointed
pursuant to Section 3.09 and shall initially be Wilmington Trust Company.
"Person" shall mean any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization, or government or any agency or political
subdivision thereof.
"Record Date" shall mean, with respect to any Distribution Date, the close
of business on the last day of the month immediately preceding such Distribution
Date.
"Sale and Servicing Agreement" shall mean the Sale and Servicing Agreement
dated as of September 11, 1996, among the Trust, as issuer, the Depositor, as
seller, NAL Acceptance Corporation, as servicer and Bankers Trust Company, as
Backup Servicer as the same may be amended or supplemented from time to time.
"Secretary of State" shall mean the Secretary of State of the State of
Delaware.
"Treasury Regulations" shall mean regulations, including proposed or
temporary Regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" shall mean the trust established by this Agreement.
"Trust Certificate" shall mean a certificate evidencing the beneficial
interest of an Owner in the Trust, substantially in the form attached hereto as
Exhibit A.
SECTION 1.02. Other Definitional Provisions. (a) Capitalized terms used
and not otherwise defined herein have the meanings assigned to them in the Sale
and Servicing Agreement or, if not defined therein, in the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement or in any such certificate or other document, and accounting terms
partly defined in this
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Agreement or in any such certificate or other document to the extent not
defined, shall have the respective meanings given to them under generally
accepted accounting principles. To the extent that the definitions of accounting
terms in this Agreement or in any such certificate or other document are
inconsistent with the meanings of such terms under generally accepted accounting
principles, the definitions contained in this Agreement or in any such
certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Section and Exhibit references
contained in this Agreement are references to Sections and Exhibits in or to
this Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation".
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
ARTICLE II
Organization
SECTION 2.01. Name. The Trust created hereby shall be known as "NAL Auto
Trust 1996-3," in which name the Owner Trustee may conduct the business of the
Trust, make and execute contracts and other instruments on behalf of the Trust
and sue and be sued.
SECTION 2.02. Office. The office of the Trust shall be in care of the Owner
Trustee at the Corporate Trust Office or at such other address in Delaware as
the Owner Trustee may designate by written notice to the Owners and the
Depositor.
SECTION 2.03. Purposes and Powers. (a) The purpose of the Trust is to
engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and the Trust
Certificates pursuant to this Agreement and to sell the Notes and the Trust
Certificates;
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(ii) with the proceeds of the sale of the Notes and the Trust
Certificates, to purchase the Receivables, to fund the Reserve Account and
to pay the organizational, start-up and transactional expenses of the
Trust;
(iii) to assign, grant, transfer, pledge, mortgage and convey the
Trust Estate pursuant to the Indenture and to hold, manage and distribute
to the Owners pursuant to the terms of the Sale and Servicing Agreement any
portion of the Trust Estate released from the Lien of, and remitted to the
Trust pursuant to, the Indenture;
(iv) to enter into and perform its obligations under the Basic
Documents to which it is to be a party;
(v) to engage in those activities, including entering into agreements,
that are necessary, suitable or convenient to accomplish the foregoing or
are incidental thereto or connected therewith; and
(vi) subject to compliance with the Basic Documents, to engage in such
other activities as may be required in connection with conservation of the
Owner Trust Estate and the making of distributions to the Owners and the
Noteholders.
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Agreement or the Basic
Documents.
SECTION 2.04. Appointment of Owner Trustee. The Depositor hereby appoints
the Owner Trustee as trustee of the Trust effective as of the date hereof, to
have all the rights, powers and duties set forth herein.
SECTION 2.05. Initial Capital Contribution of Owner Trust Estate. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby
acknowledges receipt in trust from the Depositor, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Owner Trust Estate
and shall be deposited in the Certificate Distribution Account. The Depositor
shall pay organizational expenses of the Trust as they may arise or shall, upon
the request of the Owner Trustee, promptly reimburse the Owner Trustee for any
such expenses paid by the Owner Trustee.
SECTION 2.06. Declaration of Trust. The Owner Trustee hereby declares that
it will hold the Owner Trust Estate in trust upon and subject to the conditions
set forth herein for the use and benefit of the Owners, subject to the
obligations of the Trust under the Basic Documents. It is the intention of the
parties hereto that the Trust constitute a business trust under the Business
Trust
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Statute and that this Agreement constitute the governing instrument of such
business trust. It is the intention of the parties hereto that, solely for
income and franchise tax purposes, the Trust shall be treated as a partnership,
with the assets of the partnership being the Receivables and other assets held
by the Trust, the partners of the partnership being the Certificateholders
(including the Depositor, in its capacity as recipient of distributions from the
Reserve Account), and the Notes being debt of the partnership. The parties agree
that, unless otherwise required by appropriate tax authorities, the Trust will
file or cause to be filed annual or other necessary returns, reports and other
forms consistent with the characterization of the Trust as a partnership for
such tax purposes. Effective as of the date hereof, the Owner Trustee shall have
all rights, powers and duties set forth herein and in the Business Trust Statute
with respect to accomplishing the purposes of the Trust.
SECTION 2.07. Liability of the Owners. (a) The Depositor shall be liable
directly to and will indemnify any injured party for all losses, claims,
damages, liabilities and expenses of the Trust (including Expenses, to the
extent not paid out of the Owner Trust Estate) to the extent that the Depositor
would be liable if the Trust were a partnership under the Delaware Revised
Uniform Limited Partnership Act in which the Depositor were a general partner;
provided, however, that the Depositor shall not be liable for any losses
incurred by a Certificateholder in the capacity of an investor in the Trust
Certificates, or by a Noteholder in the capacity of an investor in the Notes. In
addition, any third party creditors of the Trust (other than in connection with
the obligations described in the preceding sentence for which the Depositor
shall not be liable) shall be deemed third party beneficiaries of this paragraph
and paragraph (c) below. The obligations of the Depositor under this paragraph
and paragraph (c) below shall be evidenced by the Trust Certificates described
in Section 3.10, which for purposes of the Business Trust Statute shall be
deemed to be a separate class of Trust Certificates from all other Trust
Certificates issued by the Trust; provided that the rights and obligations
evidenced by all Trust Certificates, regardless of class, shall, except as
provided in this Section, be identical.
(b) No Owner, other than to the extent set forth in paragraphs (a) and (c),
shall have any personal liability for any liability or obligation of the Trust.
(c) The Depositor agrees to be liable directly to and will indemnify any
injured party for all losses, claims, damages, liabilities and expenses (other
than those incurred by a Certificateholder in the capacity of an investor in the
Trust Certificates and a Noteholder in the capacity of an investor in the Notes)
as though such arrangements were a partnership under the Delaware Revised
Uniform Limited Partnership Act in which the Depositor were a general partner.
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SECTION 2.08. Title to Trust Property. Legal title to all the Owner Trust
Estate shall be vested at all times in the Trust as a separate legal entity
except where applicable law in any jurisdiction requires title to any part of
the Owner Trust Estate to be vested in a trustee or trustees, in which case
title shall be deemed to be vested in the Owner Trustee, a co-trustee and/or a
separate trustee, as the case may be.
SECTION 2.09. Situs of Trust. The Trust will be located and administered in
the State of Delaware. All bank accounts maintained by the Owner Trustee on
behalf of the Trust shall be located in the State of Delaware or the State of
New York. The Trust shall not have any employees in any state other than
Delaware; provided, however, that nothing herein shall restrict or prohibit the
Owner Trustee from having employees within or without the State of Delaware.
Payments will be received by the Trust only in Delaware or New York, and
payments will be made by the Trust only from Delaware or New York. The only
office of the Trust will be at the Corporate Trust Office in Delaware.
SECTION 2.10. Representations and Warranties of the Depositor. The
Depositor hereby represents and warrants to the Owner Trustee that:
(a) The Depositor is duly organized and validly existing as a
corporation in good standing under the laws of the State of Delaware, with
power and authority to own its properties and to conduct its business as
such properties are currently owned and such business is presently
conducted.
(b) The Depositor is duly qualified to do business as a foreign
corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of its
property or the conduct of its business shall require such qualifications.
(c) The Depositor has the power and authority to execute and deliver
this Agreement and to carry out its terms; the Depositor has full power and
authority to sell and assign the property to be sold and assigned to and
deposited with the Trust and the Depositor has duly authorized such sale
and assignment and deposit to the Trust by all necessary corporate action;
and the execution, delivery and performance of this Agreement have been
duly authorized by the Depositor by all necessary corporate action.
(d) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time) a default under, the certificate
of incorporation or bylaws of the Depositor, or any indenture, agreement or
other instrument to which the Depositor is a party or by which it is
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bound; nor result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement or other
instrument (other than pursuant to the Basic Documents); nor violate any
law or, to the best of the Depositor's knowledge, any order, rule or
regulation applicable to the Depositor of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Depositor or its properties.
(e) There are no proceedings or investigations pending or, to the
Depositor's best knowledge, threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties: (A) asserting the
invalidity of this Agreement, (B) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or (C) seeking any
determination or ruling that might materially and adversely affect the
performance by the Depositor of its obligations under, or the validity or
enforceability of, this Agreement.
SECTION 2.11. Maintenance of the Demand Note. To the fullest extent
permitted by applicable law, the Depositor agrees that it shall not sell,
convey, pledge, transfer or otherwise dispose of the Demand Note.
SECTION 2.12. Federal Income Tax Provisions. Annex A to this Agreement sets
forth the tax accounting and administration of the Trust in a manner consistent
with its treatment as a partnership for federal, state and local tax purposes.
ARTICLE III
Trust Certificates and Transfer of Interests
SECTION 3.01. Initial Ownership. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.05 and until the issuance of
the Trust Certificates, the Depositor shall be the sole beneficiary of the
Trust.
SECTION 3.02. The Trust Certificates. The Trust Certificates shall be
issued in minimum denominations of $100,000 and in integral multiples of $1,000
in excess thereof; provided, however, that the Trust Certificates issued to the
Depositor pursuant to Section 3.10 may be issued in such denomination as
required to include any residual amount. The Trust Certificates shall be
executed on behalf of the Trust by manual or facsimile signature of an
authorized officer of the Owner Trustee. Trust Certificates bearing the manual
or facsimile signatures of individuals who were, at the time when such
signatures shall have been affixed, authorized to sign on behalf of the Trust,
shall be validly issued
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and entitled to the benefit of this Agreement, notwithstanding that such
individuals or any of them shall have ceased to be so authorized prior to the
authentication and delivery of such Trust Certificates or did not hold such
offices at the date of authentication and delivery of such Trust Certificates.
A transferee of a Trust Certificate shall become a Certificateholder and
shall be entitled to the rights and subject to the obligations of a
Certificateholder hereunder upon such transferee's acceptance of a Trust
Certificate duly registered in such transferee's name pursuant to Section 3.04.
SECTION 3.03. Authentication of Trust Certificates. On the Closing Date,
the Owner Trustee shall cause the Trust Certificates in an aggregate principal
amount equal to the Initial Certificate Balance to be executed on behalf of the
Trust, authenticated and delivered to or upon the written order of the
Depositor, signed by its chairman of the board, its president, any vice
president, secretary or any assistant treasurer, without further corporate
action by the Depositor, in authorized denominations. No Trust Certificate shall
entitle its Holder to any benefit under this Agreement or be valid for any
purpose unless there shall appear on such Trust Certificate a certificate of
authentication substantially in the form set forth in Exhibit A, executed by the
Owner Trustee, by manual signature; such authentication shall constitute
conclusive evidence that such Trust Certificate shall have been duly
authenticated and delivered hereunder. All Trust Certificates shall be dated the
date of their authentication.
SECTION 3.04. Registration of Transfer and Exchange of Trust Certificates.
The Certificate Registrar shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 3.08, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Owner Trustee
shall provide for the registration of Trust Certificates and of transfers and
exchanges of Trust Certificates as herein provided. Wilmington Trust Company
shall be the initial Certificate Registrar.
The Certificates have not been and will not be registered under the
Securities Act and will not be listed on any exchange. No transfer of a
Certificate shall be made unless such transfer is made pursuant to an effective
registration statement under the Securities Act and any applicable state
securities laws or is exempt from the registration requirements under said Act
and such state securities laws. In the event that a transfer is to be made in
reliance upon an exemption from the Securities Act and state securities laws, in
order to assure compliance with the Securities Act and such laws, the Holder
desiring to effect such transfer and such Holder's prospective transferee shall
each certify to the Owner Trustee and the Depositor in writing the facts
surrounding the transfer in substantially the forms set forth in Exhibit C (the
"Transferor Certificate") and Exhibit D (the "Investment Letter"). Except in the
case of a transfer as to which the proposed
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transferee has provided an Investment Letter with respect to a Rule 144A
transaction, there shall also be delivered to the Owner Trustee an opinion of
counsel that such transfer may be made pursuant to an exemption from the
Securities Act and state securities laws, which opinion of counsel shall not be
an expense of the Trust, the Owner Trustee or the Indenture Trustee (unless it
is the transferee from whom such opinion is to be obtained) or of the Depositor
or NAL; provided that such opinion of counsel in respect of the applicable state
securities laws may be a memorandum of law rather than an opinion if such
counsel is not licensed in the applicable jurisdiction. The Depositor shall
provide to any Holder of a Certificate and any prospective transferee designated
by any such Holder information regarding the Certificates and the Receivables
and such other information as shall be necessary to satisfy the condition to
eligibility set forth in Rule 144A(d)(4) for transfer of any such Certificate
without registration thereof under the Securities Act pursuant to the
registration exemption provided by Rule 144A. Each Holder of a Certificate
desiring to effect such a transfer shall, and does hereby agree to, indemnify
the Issuer, the Owner Trustee, the Indenture Trustee and the Depositor against
any liability that may result if the transfer is not so exempt or is not made in
accordance with federal and state securities laws.
No transfer of a Trust Certificate shall be made to any Person unless the
Owner Trustee has received (A) a certificate in the form of paragraph 3 to the
Investment Letter attached hereto as Exhibit D from such Person to the effect
that such Person is not (i) an employee benefit plan (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
that is subject to the provisions of Title I of ERISA, (ii) a plan described in
Section 4975(e)(1) of the Code or (iii) any entity whose underlying assets
include plan assets by reason of a plan's investment in the entity (each, a
"Benefit Plan"), (B) an opinion of counsel satisfactory to the Owner Trustee and
the Depositor to the effect that the purchase and holding of such Trust
Certificate will not constitute or result in the assets of the Issuer being
deemed to be "plan assets" subject to the prohibited transactions provisions of
ERISA or Section 4975 of the Code and will not subject the Owner Trustee, the
Indenture Trustee or the Depositor to any obligation in addition to those
undertaken in the Basic Documents or (C) if such Person is an insurance company,
a representation that such Person is an insurance company that is purchasing
such Certificates with funds contained in an "insurance company general account"
(as such term is defined in section v(e) of Prohibited Transaction Class
Exemption 95-60 ("PTCE 95-60")) and that the purchase and holding of such
Certificates and any deemed extension of credit from a Certificateholder which
is a party in interest to a Plan, the assets of which are held by such
"Insurance Company" are covered under PTCE 95-60; provided, however, that the
Owner Trustee will not require such certificate or opinion in the event that, as
a result of a change of law or otherwise, counsel satisfactory to the Owner
Trustee has rendered an opinion to the
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effect that the purchase and holding of a Trust Certificate by a Benefit Plan or
a Person that is purchasing or holding such a Trust Certificate with the assets
of a Benefit Plan will not constitute or result in a prohibited transaction
under ERISA or Section 4975 of the Code. The preparation and delivery of the
certificate and opinions referred to above shall not be an expense of the
Issuer, the Owner Trustee, the Indenture Trustee, the Servicer or the Depositor.
The Owner Trustee shall cause each Certificate to contain a legend stating
that transfer of the Certificates is subject to certain restrictions and
referring prospective purchasers of the Certificates to the terms of this
Agreement with respect to such restrictions.
Upon surrender for registration of transfer of any Trust Certificate at the
office or agency maintained pursuant to Section 3.08, the Owner Trustee shall
execute, authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Trust Certificates in authorized denominations of a
like aggregate amount dated the date of authentication by the Owner Trustee or
any authenticating agent. At the option of a Holder, Trust Certificates may be
exchanged for other Trust Certificates of authorized denominations of a like
aggregate amount upon surrender of the Trust Certificates to be exchanged at the
office or agency maintained pursuant to Section 3.08.
Every Trust Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the Holder or such Holder's attorney duly authorized in writing.
Each Trust Certificate surrendered for registration of transfer or exchange
shall be cancelled and subsequently disposed of by the Owner Trustee in
accordance with its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Trust Certificates, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Trust Certificates.
The preceding provisions of this Section notwithstanding, the Owner Trustee
shall not make, and the Certificate Registrar shall not register transfers or
exchanges of, Trust Certificates for a period of 15 days preceding the due date
for any payment with respect to the Trust Certificates.
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates. If
(a) any mutilated Trust Certificate shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the
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destruction, loss or theft of any Trust Certificate and (b) there shall be
delivered to the Certificate Registrar and the Owner Trustee such security or
indemnity as may be required by them to save each of them harmless, then in the
absence of notice that such Trust Certificate has been acquired by a bona fide
purchaser, the Owner Trustee on behalf of the Trust shall execute and the Owner
Trustee shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Trust Certificate, a new Trust Certificate
of like tenor and denomination. In connection with the issuance of any new Trust
Certificate under this Section, the Owner Trustee or the Certificate Registrar
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith. Any duplicate
Trust Certificate issued pursuant to this Section shall constitute conclusive
evidence of ownership in the Trust, as if originally issued, whether or not the
lost, stolen or destroyed Trust Certificate shall be found at any time.
SECTION 3.06. Persons Deemed Owners. Prior to due presentation of a Trust
Certificate for registration of transfer, the Owner Trustee, the Certificate
Registrar or any Paying Agent may treat the Person in whose name any Trust
Certificate is registered in the Certificate Register as the owner of such Trust
Certificate for the purpose of receiving distributions pursuant to Section 5.02
and for all other purposes whatsoever, and none of the Owner Trustee, the
Certificate Registrar or any Paying Agent shall be bound by any notice to the
contrary.
SECTION 3.07. Access to List of Certificateholders' Names and Addresses.
The Owner Trustee shall furnish or cause to be furnished to the Servicer and the
Depositor, within 15 days after receipt by the Owner Trustee of a written
request therefor from the Servicer or the Depositor, a list, in such form as the
Servicer or the Depositor may reasonably require, of the names and addresses of
the Certificateholders as of the most recent Record Date. If three or more
Certificateholders or one or more Holders of Trust Certificates evidencing not
less than 25% of the Certificate Balance apply in writing to the Owner Trustee,
and such application states that the applicants desire to communicate with other
Certificateholders with respect to their rights under this Agreement or under
the Trust Certificates and such application is accompanied by a copy of the
communication that such applicants propose to transmit, then the Owner Trustee
shall, within five Business Days after the receipt of such application, afford
such applicants access during normal business hours to the current list of
Certificateholders. Each Holder, by receiving and holding a Trust Certificate,
shall be deemed to have agreed not to hold any of the Depositor, the Certificate
Registrar or the Owner Trustee accountable by reason of the disclosure of its
name and address, regardless of the source from which such information was
derived.
SECTION 3.08. Maintenance of Office or Agency. The Owner Trustee shall
maintain in the Borough of Manhattan, The City of New
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York, an office or offices or agency or agencies where Trust Certificates may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Owner Trustee in respect of the Trust Certificates and
the Basic Documents may be served. The Owner Trustee initially designates Harris
Trust Company of New York, 77 Water Street, 4th Floor, New York, New York 10005,
Attention: Wilbert Myles, as its office for such purposes. The Owner Trustee
shall give prompt written notice to the Depositor and to the Certificateholders
of any change in the location of the Certificate Register or any such office or
agency.
SECTION 3.09. Appointment of Paying Agent. The Paying Agent shall make
distributions to Certificateholders from the Certificate Distribution Account
pursuant to Section 5.02 and shall report the amounts of such distributions to
the Owner Trustee. Any Paying Agent shall have the revocable power to withdraw
funds from the Certificate Distribution Account for the purpose of making the
distributions referred to above. The Owner Trustee may revoke such power and
remove the Paying Agent if the Owner Trustee determines in its sole discretion
that the Paying Agent shall have failed to perform its obligations under this
Agreement in any material respect. The Owner Trustee will be the initial Paying
Agent. In the event that the Owner Trustee shall no longer be the Paying Agent,
the Owner Trustee shall appoint a successor to act as Paying Agent (which shall
be a bank or trust company). The Owner Trustee shall cause such successor Paying
Agent or any additional Paying Agent appointed by the Owner Trustee to execute
and deliver to the Owner Trustee an instrument in which such successor Paying
Agent or additional Paying Agent shall agree with the Owner Trustee that, as
Paying Agent, such successor Paying Agent or additional Paying Agent will hold
all sums, if any, held by it for payment to the Certificateholders in trust for
the benefit of the Certificateholders entitled thereto until such sums shall be
paid to such Certificateholders. The Paying Agent shall return all unclaimed
funds to the Owner Trustee and upon removal of a Paying Agent such Paying Agent
shall also return all funds in its possession to the Owner Trustee. The
provisions of Sections 7.01, 7.03, 7.04 and 8.01 shall apply to the Owner
Trustee also in its role as Paying Agent, for so long as the Owner Trustee shall
act as Paying Agent and, to the extent applicable, to any other paying agent
appointed hereunder. Any reference in this Agreement to the Paying Agent shall
include any co-paying agent unless the context requires otherwise.
SECTION 3.10. Ownership by Depositor of Trust Certificates. The Depositor
shall on the Closing Date retain Trust Certificates representing at least 1% of
the Initial Certificate Balance and shall thereafter retain beneficial and
record ownership of Trust Certificates representing at least 1% of the
Certificate Balance. Any attempted transfer of the Depositor's Trust Certificate
that would reduce such interest of the Depositor below 1% of the Certificate
Balance shall be void. The Owner Trustee shall cause
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the Depositor's Trust Certificate to contain a legend stating "THIS CERTIFICATE
IS NON-TRANSFERABLE".
ARTICLE IV
Actions by Owner Trustee
SECTION 4.01. Prior Notice to Owners with Respect to Certain Matters. With
respect to the following matters, the Owner Trustee shall not take action unless
at least 30 days before the taking of such action, the Owner Trustee shall have
notified the Certificateholders in writing of the proposed action and the Owners
shall not have notified the Owner Trustee in writing prior to the 30th day after
such notice is given that such Owners have withheld consent or provided
alternative direction:
(a) the initiation of any claim or lawsuit by the Trust (except claims or
lawsuits brought in connection with the collection of the Receivables) and the
compromise of any action, claim or lawsuit brought by or against the Trust
(except with respect to the aforementioned claims or lawsuits for collection of
the Receivables);
(b) the election by the Trust to file an amendment to the Certificate of
Trust (unless such amendment is required to be filed under the Business Trust
Statute);
(c) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is required;
(d) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is not required and such
amendment would materially adversely affect the interests of the Owners;
(e) the amendment, change or modification of the Administration Agreement,
except to cure any ambiguity or to amend or supplement any provision in a manner
or add any provision that would not materially adversely affect the interests of
the Owners; or
(f) the appointment pursuant to the Indenture of a successor Note
Registrar, Paying Agent or Indenture Trustee or pursuant to this Agreement of a
successor Certificate Registrar, or the consent to the assignment by the Note
Registrar, Paying Agent or Indenture Trustee or Certificate Registrar of its
obligations under the Indenture or this Agreement, as applicable.
SECTION 4.02. Action by Owners with Respect to Certain Matters. The Owner
Trustee shall not have the power, except upon the written direction of the
Owners, to (a) remove the
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Administrator under the Administration Agreement pursuant to Section 8 thereof,
(b) appoint a successor Administrator under the Administration Agreement
pursuant to Section 8 thereof, (c) remove the Servicer under the Sale and
Servicing Agreement pursuant to Section 8.01 thereof or (d) except as expressly
provided in the Basic Documents, sell the Receivables after the termination of
the Indenture. The Owner Trustee shall take the actions referred to in the
preceding sentence only upon written instructions signed by the Owners.
SECTION 4.03. Action by Owners with Respect to Bankruptcy. The Owner
Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the unanimous prior approval of all
Owners and the delivery to the Owner Trustee by each such Owner of a certificate
certifying that such Owner reasonably believes that the Trust is insolvent.
SECTION 4.04. Restrictions on Owners' Power. The Owners shall not direct
the Owner Trustee to take or to refrain from taking any action if such action or
inaction would be contrary to any obligation of the Trust or the Owner Trustee
under this Agreement or any of the Basic Documents or would be contrary to
Section 2.03 or contrary to applicable law, nor shall the Owner Trustee be
obligated to follow any such direction, if given.
SECTION 4.05. Majority Control. Except as expressly provided herein, any
action that may be taken by the Owners under this Agreement may be taken by the
Holders of Trust Certificates evidencing not less than a majority of the
Certificate Balance. Except as expressly provided herein, any written notice of
the Owners delivered pursuant to this Agreement shall be effective if signed by
Holders of Trust Certificates evidencing not less than a majority of the
Certificate Balance at the time of the delivery of such notice.
ARTICLE V
Application of Trust Funds; Certain Duties
SECTION 5.01. Establishment of Trust Account. The Owner Trustee, for the
benefit of the Certificateholders, shall establish and maintain in the name of
the Trust an Eligible Deposit Account (the "Certificate Distribution Account"),
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of the Certificateholders.
The Owner Trustee shall possess all right, title and interest in all funds
on deposit from time to time in the Certificate Distribution Account and in all
proceeds thereof. Except as otherwise expressly provided herein, the Certificate
Distribution Account shall be under the sole dominion and control of the Owner
Trustee for the benefit of the Certificateholders. If, at any
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time, the Certificate Distribution Account ceases to be an Eligible Deposit
Account, the Owner Trustee (or the Depositor on behalf of the Owner Trustee, if
the Certificate Distribution Account is not then held by the Owner Trustee or an
affiliate thereof) shall within 10 Business Days (or such longer period, not to
exceed 30 calendar days, as to which each Rating Agency may consent) establish a
new Certificate Distribution Account as an Eligible Deposit Account and shall
transfer any cash and/or any investments to such new Certificate Distribution
Account.
SECTION 5.02. Application of Trust Funds. (a) On each Distribution Date,
the Owner Trustee will distribute to Certificateholders, on a pro rata basis,
amounts deposited in the Certificate Distribution Account pursuant to Sections
5.05 and 5.06 of the Sale and Servicing Agreement with respect to such
Distribution Date.
(b) On each Distribution Date, the Owner Trustee shall send to each
Certificateholder the statement or statements provided to the Owner Trustee by
the Servicer pursuant to Section 5.07 of the Sale and Servicing Agreement with
respect to such Distribution Date.
SECTION 5.03. Method of Payment. Subject to Section 9.01(c), distributions
required to be made to Certificateholders on any Distribution Date shall be made
to each Certificateholder of record on the preceding Record Date either (x) by
wire transfer, in immediately available funds, to the account of such Holder at
a bank or other entity having appropriate facilities therefor, if such
Certificateholder shall have provided to the Certificate Registrar appropriate
written instructions no later than the Record Date prior to such Distribution
Date, or (y) if such Holder does not qualify under clause (x), by check mailed
to such Certificateholder at the address of such holder appearing in the
Certificate Register.
SECTION 5.04. No Segregation of Moneys; No Interest. Subject to Sections
5.01 and 5.02, moneys received by the Owner Trustee hereunder need not be
segregated in any manner except to the extent required by law or the Sale and
Servicing Agreement and may be deposited under such general conditions as may be
prescribed by law, and the Owner Trustee shall not be liable for any interest
thereon.
SECTION 5.05. Accounting and Reports to the Noteholders, Owners, the
Internal Revenue Service and Others. In accordance with Annex A hereto, the
Owner Trustee shall (a) maintain (or cause to be maintained) the books of the
Trust on a calendar year basis and the accrual method of accounting, in a manner
consistent with its treatment as a partnership for federal and applicable state
and local tax purposes, (b) deliver to each Owner, as may be required by the
Code and applicable Treasury Regulations, such information as may be required
(including Schedule K-1) to enable each Owner to
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prepare its federal and state income tax returns, (c) file such tax returns
relating to the Trust (including a partnership information return, IRS Form
1065) and make such elections as from time to time may be required or
appropriate under any applicable state or federal statute or any rule or
regulation thereunder so as to maintain the Trust's characterization as a
partnership for federal income tax purposes, (d) cause such tax returns to be
signed in the manner required by law and (e) collect or cause to be collected
any withholding tax as described in and in accordance with Section 5.02(c) with
respect to income or distributions to Owners. The Owner Trustee shall elect
under Section 1278 of the Code to include in income currently any market
discount that accrues with respect to the Receivables. The Owner Trustee shall
not make the election provided under Section 754 of the Code.
SECTION 5.06. Signature on Returns. The Owner Trustee shall sign on behalf
of the Trust the tax returns of the Trust, unless applicable law requires an
Owner to sign such documents, in which case such documents shall be signed by
the Depositor.
ARTICLE VI
Authority and Duties of Owner Trustee
SECTION 6.01. General Authority. The Owner Trustee is authorized and
directed to execute and deliver the Basic Documents to which the Trust is to be
a party and each certificate or other document attached as an exhibit to or
contemplated by the Basic Documents to which the Trust is to be a party and, in
each case, in such form as the Depositor shall approve, as evidenced
conclusively by the Owner Trustee's execution thereof. In addition to the
foregoing, the Owner Trustee is authorized, but shall not be obligated, to take
all actions required of the Trust pursuant to the Basic Documents. The Owner
Trustee is further authorized from time to time to take such action as the
Administrator recommends with respect to the Basic Documents.
SECTION 6.02. General Duties. It shall be the duty of the Owner Trustee to
discharge (or cause to be discharged) all of its responsibilities pursuant to
the terms of this Agreement and the Basic Documents to which the Trust is a
party and to administer the Trust in the interest of the Owners, subject to the
Basic Documents and in accordance with the provisions of this Agreement.
Notwithstanding the foregoing, the Owner Trustee shall be deemed to have
discharged its duties and responsibilities hereunder and under the Basic
Documents to the extent the Administrator has agreed in the Administration
Agreement to perform any act or to discharge any duty of the Owner Trustee
hereunder or under any Basic Document, and the Owner Trustee shall not be held
liable for the default or failure of the Administrator to carry out its
obligations under the Administration Agreement.
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SECTION 6.03. Action upon Instruction. (a) Subject to Article IV and in
accordance with the terms of the Basic Documents, the Owners may by written
instruction direct the Owner Trustee in the management of the Trust. Such
direction may be exercised at any time by written instruction of the Owners
pursuant to Article IV.
(b) The Owner Trustee shall not be required to take any action hereunder or
under any Basic Document if the Owner Trustee shall have reasonably determined,
or shall have been advised by counsel, that such action is likely to result in
liability on the part of the Owner Trustee or is contrary to the terms hereof or
of any Basic Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or under
any Basic Document, the Owner Trustee shall promptly give notice (in such form
as shall be appropriate under the circumstances) to the Owners requesting
instruction as to the course of action to be adopted, and to the extent the
Owner Trustee acts in good faith in accordance with any written instruction of
the Owners received, the Owner Trustee shall not be liable on account of such
action to any Person. If the Owner Trustee shall not have received appropriate
instruction within 10 days of such notice (or within such shorter period of time
as reasonably may be specified in such notice or may be necessary under the
circumstances) it may, but shall be under no duty to, take or refrain from
taking such action not inconsistent with this Agreement or the Basic Documents,
as it shall deem to be in the best interests of the Owners, and shall have no
liability to any Person for such action or inaction.
(d) In the event that the Owner Trustee is unsure as to the application of
any provision of this Agreement or any Basic Document or any such provision is
ambiguous as to its application, or is, or appears to be, in conflict with any
other applicable provision, or in the event that this Agreement permits any
determination by the Owner Trustee or is silent or is incomplete as to the
course of action that the Owner Trustee is required to take with respect to a
particular set of facts, the Owner Trustee may give notice (in such form as
shall be appropriate under the circumstances) to the Owners requesting
instruction and, to the extent that the Owner Trustee acts or refrains from
acting in good faith in accordance with any such instruction received, the Owner
Trustee shall not be liable, on account of such action or inaction, to any
Person. If the Owner Trustee shall not have received appropriate instruction
within 10 days of such notice (or within such shorter period of time as
reasonably may be specified in such notice or may be necessary under the
circumstances) it may, but shall be under no duty to, take or refrain from
taking such action not inconsistent with this Agreement or the Basic Documents,
as it shall deem to be in the best interests of the Owners, and shall have no
liability to any Person for such action or inaction.
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SECTION 6.04. No Duties Except as Specified in this Agreement or in
Instructions. The Owner Trustee shall not have any duty or obligation to manage,
make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement or in any document or written instruction received by the
Owner Trustee pursuant to Section 6.03; and no implied duties or obligations
shall be read into this Agreement or any Basic Document against the Owner
Trustee. The Owner Trustee shall have no responsibility for filing any financing
or continuation statement in any public office at any time or to otherwise
perfect or maintain the perfection of any security interest or lien granted to
it hereunder or to prepare or file any Securities and Exchange Commission filing
for the Trust or to record this Agreement or any Basic Document. The Owner
Trustee nevertheless agrees that it will, at its own cost and expense, promptly
take all action as may be necessary to discharge any liens on any part of the
Owner Trust Estate that result from actions by, or claims against, the Owner
Trustee that are not related to the ownership or the administration of the Owner
Trust Estate.
SECTION 6.05. No Action Except Under Specified Documents or Instructions.
The Owner Trustee shall not manage, control, use, sell, dispose of or otherwise
deal with any part of the Owner Trust Estate except (i) in accordance with the
powers granted to and the authority conferred upon the Owner Trustee pursuant to
this Agreement, (ii) in accordance with the Basic Documents and (iii) in
accordance with any document or instruction delivered to the Owner Trustee
pursuant to Section 6.03.
SECTION 6.06. Restrictions. The Owner Trustee shall not take any action (a)
that is inconsistent with the purposes of the Trust set forth in Section 2.03 or
(b) that, to the actual knowledge of the Owner Trustee, would result in the
Trust's becoming taxable as a corporation for federal income tax purposes. The
Owners shall not direct the Owner Trustee to take action that would violate the
provisions of this Section.
ARTICLE VII
Concerning the Owner Trustee
SECTION 7.01. Acceptance of Trusts and Duties. The Owner Trustee accepts
the trusts hereby created and agrees to perform its duties hereunder with
respect to such trusts, but only upon the terms of this Agreement. The Owner
Trustee also agrees to disburse all moneys actually received by it constituting
part of the Owner Trust Estate upon the terms of the Basic Documents and this
Agreement. The Owner Trustee shall not be answerable or accountable hereunder or
under any Basic Document under any
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circumstances, except (i) for its own willful misconduct or gross negligence (or
negligence in the case of handling funds), (ii) for liabilities arising from the
failure by the Owner Trustee to perform obligations expressly undertaken by it
in the last sentence of Section 6.04 hereof, (iii) for any investments made by
the Owner Trustee with Wilmington Trust Company (in its individual capacity) in
its commercial capacity, (iv) in the case of the inaccuracy of any
representation or warranty contained in Section 7.03 expressly made by the Owner
Trustee or (v) for federal or Delaware taxes, fees or other charges, based on or
measured by any fees, commissions or compensation received by the Owner Trustee
in connection with any of the transactions contemplated by this Agreement or any
of the Basic Documents. In particular, but not by way of limitation (and subject
to the exceptions set forth in the preceding sentence):
(a) The Owner Trustee shall not be liable for any error of judgment made by
a Trust Officer of the Owner Trustee;
(b) The Owner Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in accordance with the instructions of the
Administrator or any Owner;
(c) No provision of this Agreement or any Basic Document shall require the
Owner Trustee to expend or risk funds or otherwise incur any financial liability
in the performance of any of its rights or powers hereunder or under any Basic
Document if the Owner Trustee shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured or provided to it;
(d) Under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents, including
the principal of and interest on the Notes;
(e) The Owner Trustee shall not be responsible for or in respect of the
validity or sufficiency of this Agreement or for the due execution hereof by the
Depositor or for the form, character, genuineness, sufficiency, value or
validity of any of the Owner Trust Estate, or for or in respect of the validity
or sufficiency of the Basic Documents, other than the certificate of
authentication on the Trust Certificates, and the Owner Trustee shall in no
event assume or incur any liability, duty or obligation to any Noteholder or to
any Owner, other than as expressly provided for herein or expressly agreed to in
the Basic Documents;
(f) The Owner Trustee shall not be liable for the default or misconduct of
the Administrator, the Depositor, the Indenture Trustee, the Servicer or the
Backup Servicer under any of the Basic Documents or otherwise, and the Owner
Trustee shall have no obligation or liability to perform the obligations of the
Trust under this Agreement or the Basic Documents that are required to be
performed by the Administrator under the Administration Agreement,
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the Indenture Trustee under the Indenture or the Servicer or AUTORICS II, Inc.,
as Depositor under the Sale and Servicing Agreement; and
(g) The Owner Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation under this Agreement or otherwise or in relation to this
Agreement or any Basic Document, at the request, order or direction of any of
the Owners, unless such Owners have offered to the Owner Trustee security or
indemnity satisfactory to it against the costs, expenses and liabilities that
may be incurred by the Owner Trustee therein or thereby. The right of the Owner
Trustee to perform any discretionary act enumerated in this Agreement or in any
Basic Document shall not be construed as a duty, and the Owner Trustee shall not
be answerable for other than its negligence or willful misconduct in the
performance of any such act.
SECTION 7.02. Furnishing of Documents. The Owner Trustee shall furnish to
the Owners promptly upon receipt of a written request therefor, duplicates or
copies of all reports, notices, requests, demands, certificates, financial
statements and any other instruments furnished to the Owner Trustee under the
Basic Documents.
SECTION 7.03. Representations and Warranties. The Owner Trustee hereby
represents and warrants to the Depositor, for the benefit of the Owners, that:
(a) It is a banking corporation duly organized and validly existing in good
standing under the laws of the State of Delaware. It has all requisite corporate
power and authority to execute, deliver and perform its obligations under this
Agreement.
(b) It has taken all corporate action necessary to authorize the execution
and delivery by it of this Agreement, and this Agreement will be executed and
delivered by one of its officers who is duly authorized to execute and deliver
this Agreement on its behalf.
(c) Neither the execution or the delivery by it of this Agreement, nor the
consummation by it of the transactions contemplated hereby, nor compliance by it
with any of the terms or provisions hereof will contravene any federal or
Delaware law, governmental rule or regulation governing the banking or trust
powers of the Owner Trustee or any judgment or order binding on it, or
constitute any default under its charter documents or bylaws or any indenture,
mortgage, contract, agreement or instrument to which it is a party or by which
any of its properties may be bound.
SECTION 7.04. Reliance; Advice of Counsel. (a) The Owner Trustee shall
incur no liability to anyone in acting upon any signature, instrument, notice,
resolution, request, consent, order,
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certificate, report, opinion, bond, or other document or paper believed by it to
be genuine and believed by it to be signed by the proper party or parties. The
Owner Trustee may accept a certified copy of a resolution of the board of
directors or other governing body of any corporate party as conclusive evidence
that such resolution has been duly adopted by such body and that the same is in
full force and effect. As to any fact or matter the method of determination of
which is not specifically prescribed herein, the Owner Trustee may for all
purposes hereof rely on a certificate, signed by the president or any vice
president or by the treasurer or other authorized officers of the relevant
party, as to such fact or matter, and such certificate shall constitute full
protection to the Owner Trustee for any action taken or omitted to be taken by
it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in the
performance of its duties and obligations under this Agreement or the Basic
Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care, and (ii) may consult with counsel, accountants and
other skilled Persons to be selected with reasonable care and employed by it.
The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written opinion or advice of any such
counsel, accountants or other such Persons and not contrary to this Agreement or
any Basic Document.
SECTION 7.05. Not Acting in Individual Capacity. Except as provided in this
Article VII, in accepting the trusts hereby created Wilmington Trust Company
acts solely as Owner Trustee hereunder and not in its individual capacity, and
all Persons having any claim against the Owner Trustee by reason of the
transactions contemplated by this Agreement or any Basic Document shall look
only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.06. Owner Trustee Not Liable for Trust Certificates or
Receivables. The Owner Trustee makes no representations as to the validity or
sufficiency of this Agreement, of any Basic Document or of the Trust
Certificates (other than the signature and countersignature of the Owner Trustee
on the Trust Certificates) or the Notes, or of any Receivable or related
documents. The Owner Trustee shall at no time have any responsibility or
liability for or with respect to the legality, validity and enforceability of
any Receivable, or the perfection and priority of any security interest created
by any Receivable in any Financed Vehicle or the maintenance of any such
perfection and priority, or for or with respect to the sufficiency of the Owner
Trust Estate or its ability to generate the payments to be distributed to
Certificateholders under this Agreement or the Noteholders under the Indenture,
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including, without limitation: the existence, condition and ownership of any
Financed Vehicle; the existence and enforceability of any insurance thereon; the
existence and contents of any Receivable on any computer or other record
thereof; the validity of the assignment of any Receivable to the Trust or of any
intervening assignment; the completeness of any Receivable; the performance or
enforcement of any Receivable; the compliance by the Depositor or the Servicer
with any warranty or representation made under any Basic Document or in any
related document or the accuracy of any such warranty or representation, or any
action of the Administrator, the Indenture Trustee or the Servicer or any
subservicer taken in the name of the Owner Trustee.
SECTION 7.07. Owner Trustee May Own Trust Certificates and Notes. The Owner
Trustee in its individual or any other capacity may become the owner or pledgee
of Trust Certificates or Notes and may deal with the Depositor, the
Administrator, the Indenture Trustee and the Servicer in banking transactions
with the same rights as it would have if it were not Owner Trustee.
ARTICLE VIII
Compensation of Owner Trustee
SECTION 8.01. Owner Trustee's Fees and Expenses. The Owner Trustee shall
receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof between the Depositor and the
Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by the
Administrator pursuant to the Administration Agreement for its other reasonable
expenses hereunder, including the reasonable compensation, expenses and
disbursements of such agents, representatives, experts and counsel as the Owner
Trustee may employ in connection with the exercise and performance of its rights
and its duties hereunder.
SECTION 8.02. Indemnification. Pursuant to the Administration Agreement,
the Administrator shall be liable as primary obligor for, and shall indemnify
the Owner Trustee and its successors, assigns, agents and servants
(collectively, the "Indemnified Parties") from and against, any and all
liabilities, obligations, losses, damages, taxes, claims, actions and suits, and
any and all reasonable costs, expenses and disbursements (including reasonable
legal fees and expenses) of any kind and nature whatsoever (collectively,
"Expenses") which may at any time be imposed on, incurred by, or asserted
against the Owner Trustee or any Indemnified Party in any way relating to or
arising out of this Agreement, the Basic Documents, the Owner Trust Estate, the
administration of the Owner Trust Estate or the action or inaction of the Owner
Trustee hereunder, except only that the Administrator shall not be liable for or
required to indemnify an Indemnified Party from and against Expenses arising or
resulting from any of the matters described in the third sentence of Section
7.01. The
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indemnities contained in this Section shall survive the resignation or
termination of the Owner Trustee or the termination of this Agreement. In any
event of any claim, action or proceeding for which indemnity will be sought
pursuant to this Section, the Owner Trustee's choice of legal counsel shall be
subject to the approval of the Administrator, which approval shall not be
unreasonably withheld.
SECTION 8.03. Payments to the Owner Trustee. Any amounts paid to the Owner
Trustee pursuant to this Article VIII shall be deemed not to be a part of the
Owner Trust Estate immediately after such payment.
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement. (a) This Agreement (other
than Article VIII) and the Trust shall terminate and be of no further force or
effect (i) upon the final distribution by the Owner Trustee of all moneys or
other property or proceeds of the Owner Trust Estate in accordance with the
terms of the Indenture, the Sale and Servicing Agreement and Article V or (ii)
at the time provided in Section 9.02. The bankruptcy, liquidation, dissolution,
death or incapacity of any Owner, other than the Depositor as described in
Section 9.02, shall not (x) operate to terminate this Agreement or the Trust or
(y) entitle such Owner's legal representatives or heirs to claim an accounting
or to take any action or proceeding in any court for a partition or winding up
of all or any part of the Trust or Owner Trust Estate or (z) otherwise affect
the rights, obligations and liabilities of the parties hereto.
(b) Except as provided in Section 9.01(a), neither the Depositor nor any
Owner shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Distribution
Date upon which Certificateholders shall surrender their Trust Certificates to
the Paying Agent for payment of the final distribution and cancellation, shall
be given by the Owner Trustee by letter to Certificateholders mailed within five
Business Days of receipt of notice of such termination from the Servicer given
pursuant to Section 9.01(c) of the Sale and Servicing Agreement, stating (i) the
Distribution Date upon or with respect to which final payment of the Trust
Certificates shall be made upon presentation and surrender of the Trust
Certificates at the office of the Paying Agent therein designated, (ii) the
amount of any such final payment and (iii) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made only
upon presentation and surrender of the Trust Certificates at the office of the
Paying Agent therein specified. The Owner
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Trustee shall give such notice to the Certificate Registrar (if other than the
Owner Trustee) and the Paying Agent at the time such notice is given to
Certificateholders. Upon presentation and surrender of the Trust Certificates,
the Paying Agent shall cause to be distributed to Certificateholders amounts
distributable on such Distribution Date pursuant to Section 5.02.
In the event that all of the Certificateholders shall not surrender their
Trust Certificates for cancellation within six months after the date specified
in the above mentioned written notice, the Owner Trustee shall give a second
written notice to the remaining Certificateholders to surrender their Trust
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Trust Certificates
shall not have been surrendered for cancellation, the Owner Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their Trust
Certificates, and the cost thereof shall be paid out of the funds and other
assets that shall remain subject to this Agreement. Any funds remaining in the
Trust after exhaustion of such remedies shall be distributed by the Owner
Trustee to the Depositor.
(d) Upon the winding up of the Trust and its termination, the Owner Trustee
shall cause the Certificate of Trust to be cancelled by filing a certificate of
cancellation with the Secretary of State in accordance with the provisions of
Section 3810 of the Business Trust Statute.
SECTION 9.02. Dissolution upon Bankruptcy of the Depositor. In the event
that an Insolvency Event shall occur with respect to the Depositor, this
Agreement shall be terminated in accordance with Section 9.01 90 days after the
date of such Insolvency Event, unless, before the end of such 90-day period, the
Owner Trustee shall have received written instructions from (a) Holders of
Certificates (other than the Depositor) representing more than 50% of the
Certificate Balance (not including the Certificate Balance of the Trust
Certificates held by the Depositor) and (b) Holders (as defined in the
Indenture) of Notes representing more than 50% of the Outstanding Amount of the
Notes, to the effect that each such party disapproves of the liquidation of the
Receivables and termination of the Trust. Promptly after the occurrence of any
Insolvency Event with respect to the Depositor, (A) the Depositor shall give the
Indenture Trustee and the Owner Trustee written notice of such Insolvency Event,
(B) the Owner Trustee shall, upon the receipt of such written notice from the
Depositor, give prompt written notice to the Certificateholders and the
Indenture Trustee, of the occurrence of such event and (C) the Indenture Trustee
shall, upon receipt of written notice of such Insolvency Event from the Owner
Trustee or the Depositor, give prompt written notice to the Noteholders of the
occurrence of such event; provided, however, that any failure to give a notice
required by this sentence shall not prevent or delay, in any manner, a
termination of the Trust
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pursuant to the first sentence of this Section 9.02. Upon a termination pursuant
to this Section, the Owner Trustee shall direct the Indenture Trustee promptly
to sell the assets of the Trust (other than the Trust Accounts and the
Certificate Distribution Account), in a commercially reasonable manner and on
commercially reasonable terms. The proceeds of such a sale of the assets of the
Trust shall be treated as collections under the Sale and Servicing Agreement.
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.01. Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times be a corporation satisfying the provisions of Section
3807(a) of the Business Trust Statute; authorized to exercise corporate trust
powers; having a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal or state authorities. If such
corporation shall publish reports of condition at least annually pursuant to law
or to the requirements of the aforesaid supervising or examining authority, then
for the purpose of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Owner Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Owner Trustee shall resign immediately in the manner and with
the effect specified in Section 10.02.
SECTION 10.02. Resignation or Removal of Owner Trustee. The Owner Trustee
may at any time resign and be discharged from the trusts hereby created by
giving written notice thereof to the Administrator. Upon receiving such notice
of resignation, the Administrator shall promptly appoint a successor Owner
Trustee by written instrument, in duplicate, one copy of which instrument shall
be delivered to the resigning Owner Trustee and one copy to the successor Owner
Trustee. If no successor Owner Trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Owner Trustee may petition any court of competent
jurisdiction for the appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in accordance
with the provisions of Section 10.01 and shall fail to resign after written
request therefor by the Administrator, or if at any time the Owner Trustee shall
be legally unable to act, or shall be adjudged bankrupt or insolvent, or a
receiver of the Owner Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Owner Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Administrator may remove the Owner
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Trustee. If the Administrator shall remove the Owner Trustee under the authority
of the immediately preceding sentence, the Administrator shall promptly appoint
a successor Owner Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the outgoing Owner Trustee so removed and one
copy to the successor Owner Trustee, and shall pay all fees owed to the outgoing
Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.03 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Administrator shall provide notice of such
resignation or removal of the Owner Trustee to each Rating Agency.
SECTION 10.03. Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.02 shall execute, acknowledge and deliver to
the Administrator and to its predecessor Owner Trustee an instrument accepting
such appointment under this Agreement, and thereupon the resignation or removal
of the predecessor Owner Trustee shall become effective, and such successor
Owner Trustee, without any further act, deed or conveyance, shall become fully
vested with all the rights, powers, duties and obligations of its predecessor
under this Agreement, with like effect as if originally named as Owner Trustee.
The predecessor Owner Trustee shall upon payment of its fees and expenses
deliver to the successor Owner Trustee all documents and statements and monies
held by it under this Agreement; and the Administrator and the predecessor Owner
Trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for fully and certainly vesting and confirming in the
successor Owner Trustee all such rights, powers, duties and obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 10.01.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Administrator shall mail notice thereof to all
Certificateholders, the Indenture Trustee, the Noteholders and the Rating
Agencies. If the Administrator shall fail to mail such notice within 10 days
after acceptance of such appointment by the successor Owner Trustee, the
successor Owner Trustee shall cause such notice to be mailed at the expense of
the Administrator.
SECTION 10.04. Merger or Consolidation of Owner Trustee. Any corporation
into which the Owner Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting
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from any merger, conversion or consolidation to which the Owner Trustee shall be
a party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Owner Trustee, shall be the successor of the
Owner Trustee hereunder, without the execution or filing of any instrument or
any further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding; provided, that such corporation shall be eligible
pursuant to Section 10.01 and, provided, further, that the Owner Trustee shall
mail notice of such merger or consolidation to each Rating Agency.
SECTION 10.05. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Owner Trust Estate or any Financed Vehicle may at the time be located,
the Administrator and the Owner Trustee acting jointly shall have the power and
shall execute and deliver all instruments to appoint one or more Persons
approved by the Administrator and Owner Trustee to act as co-trustee, jointly
with the Owner Trustee, or as separate trustee or separate trustees, of all or
any part of the Owner Trust Estate, and to vest in such Person, in such
capacity, such title to the Trust or any part thereof and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and trusts
as the Administrator and the Owner Trustee may consider necessary or desirable.
If the Administrator shall not have joined in such appointment within 15 days
after the receipt by it of a request so to do, the Owner Trustee alone shall
have the power to make such appointment. No co-trustee or separate trustee under
this Agreement shall be required to meet the terms of eligibility as a successor
Owner Trustee pursuant to Section 10.01 and no notice of the appointment of any
co-trustee or separate trustee shall be required pursuant to Section 10.03.
Each separate trustee and co-trustee shall, to the extent permitted by law,
be appointed and act subject to the following provisions and conditions:
(a) All rights, powers, duties and obligations conferred or imposed upon
the Owner Trustee shall be conferred upon and exercised or performed by the
Owner Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized to act
separately without the Owner Trustee joining in such act), except to the extent
that under any law of any jurisdiction in which any particular act or acts are
to be performed, the Owner Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Owner Trust Estate or any
portion thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or co-trustee, but solely at the direction of
the Owner Trustee;
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(b) No trustee under this Agreement shall be personally liable by reason of
any act or omission of any other trustee under this Agreement; and
(c) The Administrator and the Owner Trustee acting jointly may at any time
accept the resignation of or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Owner Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Owner Trustee or
separately, as may be provided therein, subject to all the provisions of this
Agreement, specifically including every provision of this Agreement relating to
the conduct of, affecting the liability of, or affording protection to, the
Owner Trustee. Each such instrument shall be filed with the Owner Trustee and a
copy thereof given to the Administrator.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Owner Trustee, to the extent permitted by law, without the appointment of a new
or successor co-trustee or separate trustee.
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments. This Agreement may be amended by
the Depositor and the Owner Trustee, with prior written notice to each Rating
Agency, without the consent of any of the Noteholders or the Certificateholders,
to cure any ambiguity, to correct or supplement any provisions in this Agreement
or for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions in this Agreement or of modifying in any
manner the rights of the Noteholders or the Certificateholders; provided,
however, that such action shall not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interests of any Noteholder or
Certificateholder.
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This Agreement may also be amended from time to time by the Depositor and
the Owner Trustee, with prior written notice to each Rating Agency, with the
consent of the Holders (as defined in the Indenture) of Notes evidencing not
less than a majority of the Outstanding Amount of the Notes and the consent of
the Holders of Certificates evidencing not less than a majority of the
Certificate Balance, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders or the Certificateholders;
provided, however, that no such amendment shall (a) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on Receivables or distributions that shall be required to be made for
the benefit of the Noteholders or the Certificateholders or (b) reduce the
aforesaid percentage of the Outstanding Amount of the Notes and the Certificate
Balance required to consent to any such amendment, without the consent of the
holders of all the outstanding Notes and Certificates.
Promptly after the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to each Certificateholder, the Indenture Trustee and each Rating Agency.
It shall not be necessary for the consent of Certificateholders,
Noteholders or the Indenture Trustee pursuant to this Section to approve the
particular form of any proposed amendment or consent, but it shall be sufficient
if such consent shall approve the substance thereof. The manner of obtaining
such consents (and any other consents of Certificateholders provided for in this
Agreement or in any other Basic Document) and of evidencing the authorization of
the execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Owner Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate of Trust,
the Owner Trustee shall cause the filing of such amendment with the Secretary of
State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall not
be obligated to, enter into any such amendment that affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
In connection with the execution of any amendment to this Trust Agreement
or any amendment of any other agreement to which the Issuer is a party, the
Owner Trustee shall be entitled to receive and conclusively rely upon an Opinion
of Counsel to the effect that such amendment is authorized or permitted by the
Basic Documents and that all conditions precedent in the Basic Documents
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for the execution and delivery thereof by the Issuer or the Owner Trustee, as
the case may be, have been satisfied.
SECTION 11.02. No Legal Title to Owner Trust Estate in Owners. The Owners
shall not have legal title to any part of the Owner Trust Estate. The Owners
shall be entitled to receive distributions with respect to their undivided
ownership interest therein only in accordance with Articles V and IX. No
transfer, by operation of law or otherwise, of any right, title or interest of
the Owners to and in their ownership interest in the Owner Trust Estate shall
operate to terminate this Agreement or the trusts hereunder or entitle any
transferee to an accounting or to the transfer to it of legal title to any part
of the Owner Trust Estate.
SECTION 11.03. Limitations on Rights of Others. Except for Section 2.07,
the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Depositor, the Owners, the Administrator and, to the extent
expressly provided herein, the Indenture Trustee and the Noteholders, and
nothing in this Agreement (other than Section 2.07 hereof), whether express or
implied, shall be construed to give to any other Person any legal or equitable
right, remedy or claim in the Owner Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
SECTION 11.04. Notices. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all notices shall be in writing and shall be
deemed given upon receipt by the intended recipient or three Business Days after
mailing if personally delivered or mailed by certified mail, return receipt
requested and postage prepaid or by recognized overnight courier or by facsimile
confirmed by delivery or mail as described above (except that notice to the
Owner Trustee shall be deemed given only upon actual receipt by the Owner
Trustee), if to the Owner Trustee, addressed to the Corporate Trust Office; if
to the Depositor, addressed to AUTORICS II, Inc., 500 Cypress Creek Road West,
Suite 590, Fort Lauderdale, FL 33309; tel.: 954-958-3591; facsimile:
954-938-8209, Attention: Dennis LaVigne; or, as to each party, at such other
address as shall be designated by such party in a written notice to each other
party.
(b) Any notice required or permitted to be given to a Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Holder as shown in the Certificate Register. Any notice so mailed within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Certificateholder receives such notice.
SECTION 11.05. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining
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provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 11.06. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.07. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, each of the
Depositor and its permitted assignees, the Owner Trustee and its successors and
each Owner and its successors and permitted assigns, all as herein provided. Any
request, notice, direction, consent, waiver or other instrument or action by an
Owner shall bind the successors and assigns of such Owner.
SECTION 11.08. Covenants of the Depositor. In the event that (a)
Certificateholders' Principal Carryover Shortfalls shall occur or (b) any
litigation with claims in excess of $1,000,000 to which the Depositor is a party
which shall be reasonably likely to result in a material judgment against the
Depositor that the Depositor will not be able to satisfy shall be commenced by
an Owner, during the period beginning nine months following the commencement of
such litigation and continuing until such litigation is dismissed or otherwise
terminated (and, if such litigation has resulted in a final judgment against the
Depositor, such judgment has been satisfied), the Depositor shall not pay any
dividend to NAL, or make any distribution on or in respect of its capital stock
to NAL, or repay the principal amount of any indebtedness of the Depositor held
by NAL, unless (i) after giving effect to such payment, distribution or
repayment, the Depositor's liquid assets shall not be less than the amount of
actual damages claimed in such litigation or (ii) the Rating Agency Condition
shall have been satisfied with respect to any such payment, distribution or
repayment. The Depositor will not at any time institute against the Trust any
bankruptcy proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Trust
Certificates, the Notes, the Trust Agreement or any of the Basic Documents.
SECTION 11.09. No Petition. The Owner Trustee, by entering into this
Agreement, each Certificateholder, by accepting a Trust Certificate, and the
Indenture Trustee and each Noteholder, by accepting the benefits of this
Agreement, hereby covenant and agree that they will not at any time institute
against the Depositor or the Trust, or join in any institution against the
Depositor or the Trust of, any bankruptcy proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Trust Certificates, the Notes, this Agreement or any of the
Basic Documents.
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SECTION 11.10. No Recourse. Each Certificateholder by accepting a Trust
Certificate acknowledges that such Certificateholder's Trust Certificates
represent beneficial interests in the Trust only and do not represent interests
in or obligations of the Depositor, the Servicer, the Administrator, the Owner
Trustee, the Indenture Trustee or any Affiliate thereof and no recourse may be
had against such parties or their assets, except as may be expressly set forth
or contemplated in this Agreement, the Trust Certificates or the Basic
Documents.
SECTION 11.11. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 11.12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.13. [Reserved.]
SECTION 11.14. Depositor Payment Obligation. The Depositor shall be
responsible for payment of the Administrator's fees under the Administration
Agreement and shall reimburse the Administrator for all expenses and liabilities
of the Administrator incurred thereunder. In addition, the Depositor shall be
responsible for the payment of all fees and expenses of the Trust, the Owner
Trustee and the Indenture Trustee paid by any of them in connection with any of
their obligations under the Basic Documents to obtain or maintain any required
license under the Motor Vehicle Sales Finance Act.
* * * * * *
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IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed by their respective officers hereunto duly authorized, as of
the day and year first above written.
AUTORICS II, INC., as Depositor,
by:______________________________
Name: Dennis R. LaVigne
Title: Vice President and Treasurer
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee,
by:______________________________
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT A
FORM OF TRUST CERTIFICATE
-------------------------
THIS CERTIFICATE IS SUBORDINATED TO THE NOTES, AS AND TO THE EXTENT SET FORTH IN
THE SALE AND SERVICING AGREEMENT.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR UNDER THE SECURITIES OR BLUE SKY
LAWS OF ANY STATE IN THE UNITED STATES OR ANY FOREIGN SECURITIES LAWS. BY ITS
ACCEPTANCE OF THIS CERTIFICATE THE HOLDER HEREOF IS DEEMED TO REPRESENT TO THE
DEPOSITOR AND THE OWNER TRUSTEE (i) THAT IT IS AN "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D PROMULGATED UNDER THE
1933 ACT (AN "ACCREDITED INVESTOR") AND THAT IT IS ACQUIRING THIS CERTIFICATE
FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR
AGENT FOR OTHERS (WHICH OTHERS ALSO ARE ACCREDITED INVESTORS UNLESS THE HOLDER
IS A BANK ACTING IN ITS FIDUCIARY CAPACITY) FOR INVESTMENT AND NOT WITH A VIEW
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, THE PUBLIC DISTRIBUTION HEREOF,
(ii) THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER
THE 1933 ACT AND IS ACQUIRING SUCH CERTIFICATE FOR ITS OWN ACCOUNT (AND NOT FOR
THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS ALSO
ARE QUALIFIED INSTITUTIONAL BUYERS) OR (iii) THAT IT IS AN INVESTOR THAT IS
OTHERWISE PERMITTED TO ACQUIRE THIS CERTIFICATE UNDER THE TRUST AGREEMENT.
NO SALE, PLEDGE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE BY ANY PERSON
UNLESS EITHER (i) SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE TO THE DEPOSITOR,
(ii) SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE TO AN ACCREDITED INVESTOR THAT
EXECUTES A CERTIFICATE, SUBSTANTIALLY IN THE FORM SPECIFIED IN THE TRUST
AGREEMENT, TO THE EFFECT THAT IT IS AN ACCREDITED INVESTOR ACTING FOR ITS OWN
ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR
OTHERS (WHICH OTHERS ALSO ARE ACCREDITED INVESTORS UNLESS THE HOLDER IS A BANK
ACTING IN ITS FIDUCIARY CAPACITY), (iii) SO LONG AS THIS CERTIFICATE IS ELIGIBLE
FOR RESALE PURSUANT TO RULE 144A UNDER THE 1933 ACT, SUCH SALE, PLEDGE OR OTHER
TRANSFER IS MADE TO A PERSON WHO THE PROSPECTIVE TRANSFEROR REASONABLY BELIEVES
AFTER DUE INQUIRY IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A), ACTING FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A
FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS ALSO ARE QUALIFIED INSTITUTIONAL
BUYERS) TO WHOM NOTICE IS GIVEN THAT THE SALE, PLEDGE OR TRANSFER IS BEING MADE
IN RELIANCE ON RULE 144A, OR (iv) SUCH SALE, PLEDGE OR OTHER TRANSFER IS
OTHERWISE MADE IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
1933 ACT, IN WHICH CASE THE OWNER TRUSTEE SHALL REQUIRE THAT BOTH THE
PROSPECTIVE TRANSFEROR AND THE PROSPECTIVE TRANSFEREE CERTIFY TO THE OWNER
TRUSTEE AND THE DEPOSITOR IN WRITING THE FACTS SURROUNDING SUCH TRANSFER, WHICH
CERTIFICATION SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO THE OWNER TRUSTEE
AND THE
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DEPOSITOR. EXCEPT IN THE CASE OF A TRANSFER DESCRIBED IN CLAUSES (i) OR (iii)
ABOVE, THE OWNER TRUSTEE SHALL REQUIRE A WRITTEN OPINION OF COUNSEL (WHICH SHALL
NOT BE AT THE EXPENSE OF THE DEPOSITOR, ANY AFFILIATE OF THE DEPOSITOR OR THE
OWNER TRUSTEE) SATISFACTORY TO THE DEPOSITOR AND THE OWNER TRUSTEE TO THE EFFECT
THAT SUCH TRANSFER WILL NOT VIOLATE THE 1933 ACT. NO SALE, PLEDGE OR OTHER
TRANSFER MAY BE MADE TO ANY ONE PERSON FOR SECURITIES WITH A FACE AMOUNT OF LESS
THAN $100,000 AND, IN THE CASE OF ANY PERSON ACTING ON BEHALF OF ONE OR MORE
THIRD PARTIES (OTHER THAN A BANK (AS DEFINED IN SECTION 3(a)(2) OF THE 1933 ACT)
ACTING IN ITS FIDUCIARY CAPACITY), FOR SECURITIES WITH A FACE AMOUNT OF LESS
THAN $100,000 FOR EACH SUCH THIRD PARTY.
EACH SECURITYHOLDER, BY ITS ACCEPTANCE OF THIS SECURITY, COVENANTS AND AGREES
THAT SUCH SECURITYHOLDER, SHALL NOT, PRIOR TO THE DATE THAT IS ONE YEAR AND ONE
DAY AFTER THE TERMINATION OF THE TRUST AGREEMENT, ACQUIESCE, PETITION OR
OTHERWISE INVOKE OR CAUSE THE TRUST, THE DEPOSITOR OR THE SELLER TO INVOKE THE
PROCESS OF ANY COURT OR GOVERNMENTAL AUTHORITY FOR THE PURPOSE OF COMMENCING OR
SUSTAINING A CASE AGAINST THE TRUST, THE DEPOSITOR OR THE SELLER UNDER ANY
FEDERAL OR STATE BANKRUPTCY, INSOLVENCY, REORGANIZATION OR SIMILAR LAW, OR
APPOINTING A RECEIVER, LIQUIDATOR, ASSIGNEE, TRUSTEE, CUSTODIAN, SEQUESTRATOR OR
OTHER SIMILAR OFFICIAL OF THE TRUST, THE DEPOSITOR OR THE SELLER OR ANY
SUBSTANTIAL PART OF ITS PROPERTY, OR ORDERING THE WINDING UP OR LIQUIDATION OF
THE AFFAIRS OF THE TRUST, THE DEPOSITOR OR THE SELLER.
THIS CERTIFICATE WILL NOT BE REGISTERED FOR TRANSFER UNLESS THE OWNER TRUSTEE
RECEIVES EITHER (1) A REPRESENTATION FROM THE TRANSFEREE OF SUCH CERTIFICATE TO
THE EFFECT THAT SUCH TRANSFEREE NEITHER IS NOR IS ACTING ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT SECURITY ACT
OF 1974, AS AMENDED ("ERISA"), SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE") OR GOVERNMENTAL PLANS (AS DEFINED IN SECTION 3(32)
OF ERISA) SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW ("SIMILAR LAW") WHICH IS,
TO A MATERIAL EXTENT, SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE
(COLLECTIVELY, A "PLAN") AND IS NOT USING THE ASSETS OF A PLAN SUBJECT TO ERISA
OR THE CODE TO INVEST IN THE CERTIFICATES, (2) IF THE TRANSFEREE IS A PLAN, OR
IS ACTING ON BEHALF OF A PLAN, OR IS USING THE ASSETS OF A PLAN, AN OPINION OF
COUNSEL SATISFACTORY TO THE OWNER TRUSTEE TO THE EFFECT THAT SUCH TRANSFER WILL
NOT RESULT IN THE ASSETS OF THE TRUST BEING DEEMED TO BE "PLAN ASSETS" OR
SUBJECT THE DEPOSITOR, THE SELLER, THE SERVICER, THE BACKUP SERVICER, THE OWNER
TRUSTEE, OR THE INDENTURE TRUSTEE TO ANY OBLIGATION IN ADDITION TO THOSE
UNDERTAKEN IN THE TRUST AGREEMENT, THE SALE AND SERVICING AGREEMENT AND THE
ADMINISTRATION AGREEMENT, INCLUDING ANY LIABILITIES ASSESSED FOR "PROHIBITED
TRANSACTIONS" UNDER ERISA, THE CODE OR SIMILAR LAW (3) IF THE TRANSFEREE IS AN
INSURANCE COMPANY, A REPRESENTATION THAT THE TRANSFEREE IS AN INSURANCE COMPANY
THAT IS ACQUIRING SUCH CERTIFICATES WITH FUNDS CONTAINED
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IN AN "INSURANCE COMPANY GENERAL ACCOUNT" (AS SUCH TERM IS DEFINED IN SECTION
V(e) OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60")) AND THAT
THE PURCHASE AND HOLDING OF SUCH CERTIFICATES AND ANY DEEMED EXTENSION OF CREDIT
FROM A CERTIFICATEHOLDER WHICH IS A PARTY IN INTEREST TO A PLAN, THE ASSETS OF
WHICH ARE HELD BY SUCH "INSURANCE COMPANY" ARE COVERED UNDER PTCE 95-60. ANY
PURPORTED TRANSFER OF A CERTIFICATE TO OR ON BEHALF OF A PLAN WITHOUT THE
DELIVERY OF AN OPINION OF COUNSEL REFERRED TO IN CLAUSE (2) ABOVE OR THE
REPRESENTATION REFERRED TO IN CLAUSE (3) ABOVE SHALL BE VOID AND OF NO EFFECT.
[THIS CERTIFICATE IS NONTRANSFERABLE.](1)
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(1) To be included only on the Certificates representing the 1% minimum required
to be retained by the Depositor and any Certificates issued in exchange
therefor.
A-3
<PAGE>
NUMBER $_________
R- CUSIP NO. 628948 AJ 0
NAL AUTO TRUST 1996-3
8.50% ASSET BACKED CERTIFICATE
evidencing a fractional undivided interest in the Trust, as defined below, the
property of which consists of retail installment sale contracts for new and used
automobiles and light duty trucks (collectively, the "Receivables"), all monies
received on or after the related Cutoff Date, security interests in the vehicles
financed thereby, certain bank accounts and the proceeds thereof, proceeds from
claims on certain insurance policies and certain other rights under the Trust
Agreement and the Sale and Servicing Agreement and all proceeds of the
foregoing.
THIS TRUST CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR
OBLIGATION OF AUTORICS II, INC., NAL ACCEPTANCE CORPORATION OR
ANY OF THEIR RESPECTIVE AFFILIATES.
THIS CERTIFIES THAT ________________ is the registered owner of
____________________________________________ DOLLARS nonassessable, fully-paid,
fractional undivided interest in NAL Auto Trust 1996-3 (the "Trust"), formed by
AUTORICS II, Inc., a Delaware corporation (the "Depositor").
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust Certificates referred to in the within-mentioned Trust
Agreement.
WILMINGTON TRUST COMPANY, not
in its individual capacity,
but solely as Owner Trustee
by: ________________________
Authorized Signatory
A-4
<PAGE>
The Trust was created pursuant to a Trust Agreement dated as of September
11, 1996, (as amended or supplemented from time to time, the "Trust Agreement"),
between the Depositor and Wilmington Trust Company, as owner trustee (the "Owner
Trustee"), a summary of certain of the pertinent provisions of which is set
forth below. To the extent not otherwise defined herein, the capitalized terms
used herein have the meanings assigned to them in the Trust Agreement or the
Sale and Servicing Agreement dated as of September 11, 1996 (as amended and
supplemented from time to time, the "Sale and Servicing Agreement"), among the
Trust, the Depositor, NAL Acceptance Corporation, as servicer (the "Servicer"),
and Bankers Trust Company, as backup servicer, as applicable.
This Certificate is one of the duly authorized Certificates designated as
"8.50% Asset Backed Certificates" (herein called the "Trust Certificates"). Also
issued under an Indenture dated as of September 11, 1996 (the "Indenture"),
between the Trust and Bankers Trust Company, as indenture trustee, are the Notes
designated as "7.30% Asset Backed Notes" (the "Notes"). This Trust Certificate
is issued under and is subject to the terms, provisions and conditions of the
Trust Agreement, to which Trust Agreement the Holder of this Trust Certificate
by virtue of its acceptance hereof assents and by which such Holder is bound.
The property of the Trust consists of retail installment sale contracts for new
and used automobiles, light duty trucks and vans (collectively, the
"Receivables"), all monies received on or after the Cutoff Date plus all
Payaheads as of the Cutoff Date; any proceeds with respect to the Receivables
from claims on any physical damage, credit life or disability, theft, mechanical
breakdown or "guaranteed auto protection" insurance policies relating to
Financed Vehicles or Obligors; proceeds of any recourse (but none of the
obligations) to Dealers on Receivables; any Financed Vehicle that shall have
secured a Receivable and shall have been acquired by or on behalf of the
Depositor, the Servicer, or the Trust; the Receivables Files; the Receivables
Purchase Agreement, including the right of the Depositor to cause NAL to
purchase Receivables under certain circumstances; the Trust Accounts; and
certain other rights under the Trust Agreement and the Sale and Servicing
Agreement and all proceeds of the foregoing. The rights of the Holders of the
Trust Certificates are subordinated to the rights of the Holders of the Notes,
as and to the extent set forth in the Sale and Servicing Agreement. [The
Depositor's Interest shall also entitle the Depositor to the distributions
specified in Sections 5.05 and 5.06 of the Sale and Servicing Agreement.]
Under the Trust Agreement, there will be distributed March 15, June 15,
September 15 and December 15 of each year or, if such day is not a Business Day,
the immediately following Business Day (each, a "Distribution Date"), commencing
on December 16, 1996, to the Person in whose name this Trust Certificate is
registered at the close of business on the last
A-5
<PAGE>
day of the month immediately preceding such Distribution Date (the "Record
Date"), such Certificateholder's fractional undivided interest in the amount to
be distributed to Certificateholders on such Distribution Date. No distributions
of principal will be made on any Certificate until all of the Notes have been
paid in full.
The Holder of this Trust Certificate acknowledges and agrees that its
rights to receive distributions in respect of this Trust Certificate are
subordinated to the rights of the Noteholders as described in the Sale and
Servicing Agreement and the Indenture.
It is the intent of the Depositor, the Servicer and the Certificateholders
that, for purposes of federal income, state and local income and single business
tax and any other income taxes, the Trust will be treated as a partnership and
the Certificateholders (including the Depositor) will be treated as partners in
that partnership. The Depositor and the other Certificateholders, by acceptance
of a Trust Certificate, agree to treat, and to take no action inconsistent with
the treatment of, the Trust Certificates for such tax purposes as partnership
interests in the Trust.
Each Certificateholder, by its acceptance of a Trust Certificate, covenants
and agrees that such Certificateholder will not at any time institute against
the Depositor, or join in any institution against the Depositor of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Trust
Certificates, the Notes, the Trust Agreement or any of the Basic Documents.
Distributions on this Trust Certificate will be made as provided in the
Trust Agreement by the Owner Trustee by wire transfer or check mailed to the
Certificateholder of record in the Certificate Register without the presentation
or surrender of this Trust Certificate or the making of any notation hereon.
Except as otherwise provided in the Trust Agreement and notwithstanding the
above, the final distribution on this Trust Certificate will be made after due
notice by the Owner Trustee of the pendency of such distribution and only upon
presentation and surrender of this Trust Certificate at the office or agency
maintained for that purpose by the Owner Trustee in the Borough of Manhattan,
The City of New York.
Reference is hereby made to the further provisions of this Trust
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been executed by
an authorized officer of the Owner Trustee, by
A-6
<PAGE>
manual signature, this Trust Certificate shall not entitle the Holder hereof to
any benefit under the Trust Agreement or the Sale and Servicing Agreement or be
valid for any purpose.
THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in
its individual capacity, has caused this Trust Certificate to be duly executed.
NAL AUTO TRUST 1996-3
by: WILMINGTON TRUST COMPANY,
not in its individual
capacity but solely as
Owner Trustee
Dated: _____________ by: ________________________
Authorized Signatory
A-7
<PAGE>
[REVERSE OF TRUST CERTIFICATE]
The Trust Certificates do not represent an obligation of, or an interest
in, the Depositor, the Servicer, the Seller, the Owner Trustee or any affiliates
of any of them and no recourse may be had against such parties or their assets,
except as expressly set forth or contemplated herein or in the Trust Agreement
or the Basic Documents. In addition, this Trust Certificate is not guaranteed by
any governmental agency or instrumentality and is limited in right of payment to
certain collections and recoveries with respect to the Receivables (and certain
other amounts), all as more specifically set forth herein and in the Sale and
Servicing Agreement. A copy of each of the Sale and Servicing Agreement and the
Trust Agreement may be examined by any Certificateholder upon written request
during normal business hours at the principal office of the Depositor and at
such other places, if any, designated by the Depositor.
The Trust Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor and the rights of the Certificateholders under the Trust Agreement at
any time by the Depositor and the Owner Trustee with the consent of the Holders
of the Trust Certificates and the Notes, each voting as a class, evidencing not
less than a majority of the Certificate Balance and the outstanding principal
balance of the Notes. Any such consent by the Holder of this Trust Certificate
shall be conclusive and binding on such Holder and on all future Holders of this
Trust Certificate and of any Trust Certificate issued upon the transfer hereof
or in exchange herefor or in lieu hereof, whether or not notation of such
consent is made upon this Trust Certificate. The Trust Agreement also permits
the amendment thereof, in certain limited circumstances, without the consent of
the Holders of any of the Trust Certificates.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Trust Certificate is registerable in the
Certificate Register upon surrender of this Trust Certificate for registration
of transfer at the offices or agencies of the Certificate Registrar maintained
by the Owner Trustee in the Borough of Manhattan, The City of New York,
accompanied by a written instrument of transfer in form satisfactory to the
Owner Trustee and the Certificate Registrar duly executed by the Holder hereof
or such Holder's attorney duly authorized in writing, and thereupon one or more
new Trust Certificates of authorized denominations evidencing the same aggregate
interest in the Trust will be issued to the designated transferee. The initial
Certificate Registrar appointed under the Trust Agreement is the Owner Trustee.
Except as provided in the Trust Agreement, the Trust Certificates are
issuable only as registered Trust Certificates
A-8
<PAGE>
without coupons in denominations of $100,000 and in integral multiples of $1,000
in excess thereof. As provided in the Trust Agreement and subject to certain
limitations therein set forth, Trust Certificates are exchangeable for new Trust
Certificates of authorized denominations evidencing the same aggregate
denomination, as requested by the Holder surrendering the same. No service
charge will be made for any such registration of transfer or exchange, but the
Owner Trustee or the Certificate Registrar may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Owner Trustee, the Certificate Registrar and any agent of the Owner
Trustee or the Certificate Registrar may treat the Person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
Owner Trustee, the Certificate Registrar or any such agent shall be affected by
any notice to the contrary.
The obligations and responsibilities created by the Trust Agreement and the
Trust created thereby shall terminate upon the payment to Certificateholders of
all amounts required to be paid to them pursuant to the Trust Agreement and the
Sale and Servicing Agreement and the disposition of all property held as part of
the Owner Trust Estate. The Servicer of the Receivables may at its option
purchase the Owner Trust Estate at a price specified in the Sale and Servicing
Agreement, and such purchase of the Receivables and other property of the Trust
will effect early retirement of the Trust Certificates; however, such right of
purchase is exercisable only as of the last day of any Collection Period as of
which the Pool Balance is less than or equal to 5% of the Original Pool Balance.
A-9
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee)
the within Trust Certificate, and all rights thereunder, and hereby irrevocably
constitutes and appoints , attorney, to transfer said Trust Certificate on the
books of the Certificate Registrar, with full power of substitution in the
premises.
Dated:
________________________________________*/
Signature Guaranteed:
____________________________*/
- ----------
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Trust Certificate in every particular,
without alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
A-10
<PAGE>
EXHIBIT B
CERTIFICATE OF TRUST OF
NAL AUTO TRUST 1996-3
---------------------
THIS Certificate of Trust of NAL AUTO TRUST 1996-3 (the "Trust"), dated
September [ ], 1996, is being duly executed and filed by Wilmington Trust
Company, a Delaware banking corporation, as owner trustee, to form a business
trust under the Delaware Business Trust Act (12 Del. C., ss. 3801 et seq.).
1. Name. The name of the business trust formed hereby is NAL Auto Trust
1996-3.
2. Delaware Trustee. The name and business address of the trustee of the
Trust in the State of Delaware is Wilmington Trust Company, 1100 N. Market St.,
Rodney Square North, Wilmington, Delaware 19890, Attention: Corporate Trust
Administration.
3. Effective Date. This Certificate of Trust shall be effective on the date
filed.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the Trust,
has executed this Certificate of Trust as of the date first-above written.
WILMINGTON TRUST COMPANY,
as Owner Trustee
By:______________________________
Name:
Title:
B-1
<PAGE>
EXHIBIT C
FORM OF TRANSFEROR CERTIFICATE
[DATE]
Autorics II, Inc.
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, FL 33309
Wilmington Trust Company, as Owner Trustee
Rodney Square North
1100 N. Market Street
Wilmington, DE 19890
Re: NAL Auto Trust 1996-3
8.50% Asset Backed Certificates
-------------------------------
Ladies and Gentlemen:
In connection with our disposition of the above-referenced 8.50% Asset
Backed Certificates (the "Certificates") we certify that (a) we understand that
the Certificates have not been registered under the Securities Act of 1933, as
amended (the "Act"), and are being transferred by us in a transaction that is
exempt from the registration requirements of the Act and (b) we have not offered
or sold any Certificates to, or solicited offers to buy any Certificates from,
any person, or otherwise approached or negotiated with any person with respect
thereto, in a manner that would be deemed, or taken any other action which would
result in, a violation of Section 5 of the Act.
Very truly yours,
[NAME OF TRANSFEROR]
By:______________________________
Authorized Officer
C-1
<PAGE>
EXHIBIT D
FORM OF INVESTMENT LETTER
Autorics II, Inc.
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, FL 33309
Wilmington Trust Company, as Owner Trustee
Rodney Square North
1100 N. Market Street
Wilmington, DE 19890
Ladies and Gentlemen:
In connection with our proposed purchase of $______ aggregate principal
amount of 8.50% Asset Backed Certificates (the "Certificates") of NAL Auto Trust
1996-3 (the "Issuer"), we confirm that:
1. We understand that the Certificates have not been registered under
the Securities Act of 1933, as amended (the "1933 Act"), and may not be
sold except as permitted in the following sentence. We understand and
agree, on our own behalf and on behalf of any accounts for which we are
acting as hereinafter stated, (x) that such Certificates are being offered
only in a transaction not involving any public offering within the meaning
of the 1933 Act and (y) that such Certificates may be resold, pledged or
transferred only (i) to the Depositor, (ii) to an "accredited investor" as
defined in Rule 501(a)(1),(2),(3) or (7) (an "Accredited Investor") under
the 1933 Act acting for its own account (and not for the account of others)
or as a fiduciary or agent for others (which others also are Accredited
Investors unless the holder is a bank acting in its fiduciary capacity)
that executes a certificate substantially in the form hereof, (iii) so long
as such Certificate is eligible for resale pursuant to Rule 144A under the
1933 Act ("Rule 144A"), to a person whom we reasonably believe after due
inquiry is a "qualified institutional buyer" as defined in Rule 144A,
acting for its own account (and not for the account of others) or as a
fiduciary or agent for others (which others also are "qualified
institutional buyers") to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A or (iv) in a sale, pledge
or other transfer made in a transaction otherwise exempt from the
registration requirements of the 1933 Act, in which case the Owner Trustee
shall require that both the prospective transferor and the prospective
transferee certify to the Owner Trustee and the Depositor in writing the
facts surrounding such transfer, which certification shall be in form and
substance
D-1
<PAGE>
satisfactory to the Owner Trustee and the Depositor. Except in the case of
a transfer described in clauses (i) or (iii) above, the Owner Trustee shall
require a written opinion of counsel (which will not be at the expense of
the Depositor, any affiliate of the Depositor or the Owner Trustee)
satisfactory to the Depositor and the Owner Trustee be delivered to the
Depositor and the Owner Trustee to the effect that such transfer will not
violate the 1933 Act, in each case in accordance with any applicable
securities laws of any state of the United States. We will notify any
purchaser of the Certificates from us of the above resale restrictions, if
then applicable. We further understand that in connection with any transfer
of the Certificates by us that the Depositor and the Owner Trustee may
request, and if so requested we will furnish such certificates and other
information as they may reasonably require to confirm that any such
transfer complies with the foregoing restrictions. We understand that no
sale, pledge or other transfer may be made to any one person of
Certificates with a face amount of less than $100,000 and, in the case of
any person acting on behalf of one or more third parties (other than a bank
(as defined in Section 3(a)((2) of the 1933 Act) acting in its fiduciary
capacity), of Certificates with a face amount of less than $100,000 for
each such third party.
2. [CHECK ONE]
|_| (a) We are an "accredited investor" (as defined in Rule
501(a)(1),(2),(3) or (7) of Regulation D under the Certificates Act)
acting for our own account (and not for the account of others) or as a
fiduciary or agent for others (which others also are Accredited
Investors unless we are a bank acting in its fiduciary capacity). We
have such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of our investment
in the Certificates, and we and any accounts for which we are acting
are each able to bear the economic risk of our or their investment for
an indefinite period of time. We are acquiring the Certificates for
investment and not with a view to, or for offer and sale in connection
with, a public distribution.
|_| (b) We are a "qualified institutional buyer" as defined under Rule
144A under the 1933 Act and are acquiring the Certificates for our own
account (and not for the account of others) or as a fiduciary or agent
for others (which others also are "qualified institutional buyers").
We are familiar with Rule 144A under the 1933 Act and are aware that
the seller of the Certificates and other parties intend to rely on the
statements made herein and the exemption from the registration
requirements of the 1933 Act provided by Rule 144A.
D-2
<PAGE>
3. We are not (i) an employee benefit plan (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) that is subject to the provisions of Title I of ERISA, (ii) a
plan described in Section 4975(e)(1) of the Code or (iii) any entity whose
underlying assets include plan assets by reason of a plan's investment in
the entity (each, a "Benefit Plan"). We hereby acknowledge that no transfer
of any Certificate shall be permitted to be made to any person unless the
Trustee has received (i) a certificate from such transferee to the effect
of the preceding sentence, (ii) an opinion of counsel satisfactory to the
Trustee to the effect that the purchase and holding of any such Certificate
will not constitute or result in the assets of the Issuer being deemed to
be "plan assets" and subject to the prohibited transaction provisions of
ERISA or Section 4975 of the Code and will not subject the Owner Trustee,
the Indenture Trustee or the Depositor to any obligation in addition to
those undertaken in the Basic Documents with respect to the Certificates
(provided, however, that the Owner Trustee will not require such
certificate or opinion in the event that, as a result of change of law or
otherwise, counsel satisfactory to the Owner Trustee has rendered an
opinion to the effect that the purchase and holding of any such Certificate
by a Benefit Plan or a Person that is purchasing or holding any such
Certificate with the assets of a Benefit Plan will not constitute or result
in a prohibited transaction under ERISA or Section 4975 of the Code) or
(iii) if the transferee is an insurance company, a representation that the
transferee is an insurance company that is acquiring such Certificates with
funds contained in an "Insurance Company General Account" (as such term is
defined in Section V(e) of Prohibited Transaction Class Exemption 95-60
("PTCE 95-60)) and that the purchase and holding of such Certificates and
any deemed extension of credit from a Certificateholder which is a party in
interest to a Plan, the assets of which are held by such "Insurance
Company" are covered under PTCE 95-60.
4. We understand that the Depositor, the Trust, Greenwich Capital
Financial Products, Inc. ("Greenwich") and others will rely upon the truth
and accuracy of the foregoing acknowledgments, representations and
agreements, and we agree that if any of the acknowledgments,
representations and warranties deemed to have been made by us by our
purchase of the Certificates, for our own account or for one or more
accounts as to each of which we exercise sole investment discretion, are no
longer accurate, we shall promptly notify the Depositor and Greenwich.
D-3
<PAGE>
5. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party
in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
[NAME OF PURCHASER]
By: _________________________________
Name:
Title:
Date: ________________________________
D-4
<PAGE>
ANNEX A
TAX PARTNERSHIP PROVISIONS
1. Characterization for Tax Purposes. For United States federal and
applicable state and local income tax purposes, the Depositor's contribution of
the Receivables to the Trust in exchange for interests in the Trust, and the
sale by the Depositor of the Certificates (other than the retention by the
Depositor of the Depositor's Trust Certificate) is intended to constitute the
formation of a partnership (the "Tax Partnership") whose partners are the
Certificateholders (which are hereinafter collectively referred to as the "Tax
Partners").
2. Election with Respect to Subchapter K. Notwithstanding anything to the
contrary, each Tax Partner agrees: (a) not to elect to be excluded from the
application of Subchapter K of Chapter 1 of Subtitle A of the Code, or any
comparable provisions of applicable state laws; and (b) to join in the execution
of such additional documents and elections as may be required in order to
effectuate the foregoing.
3. Capital Contributions and Capital Accounts.
(a) The value of the interests contributed by the Certificateholders
(other than the Depositor) shall equal the amount paid by such
Certificateholders, respectively, for their Certificates and such amounts
shall constitute the opening balance in their Capital Accounts (as
hereinafter defined). The value of the interests contributed by the
Depositor shall equal the fair market value of the Depositor's Interest,
which the Tax Partners agree shall be based on the sum, without
duplication, of (i) the Reserve Account Initial Deposit and (ii) the value
of the Depositor's Interest based on (A) as to the Certificate Balance and
interest at the Pass-Through Rate of the Depositor's Trust Certificate,
the average price of the Certificates to investors and (B) as to all other
amounts due the Depositor, the present value of the cash flow to the
Depositor of the amounts to which the Depositor is entitled to receive
pursuant to Sections 5.05(b)(viii) and 5.06(b) and (e) of the Sale and
Servicing Agreement at each Distribution Date or upon termination of the
Trust using a discount rate that reflects an appropriate arm's-length
equity rate of return and a prepayment assumption of 1.75 ABS, and such
total shall be submitted to the Owner Trustee in writing within ten (10)
Business Days after the Closing Date. Such amount shall constitute the
opening balance in the Depositor's Capital Account.
(b) An individual capital account (a "Capital Account") shall be
maintained for each Tax Partner in compliance with Treasury Regulation
Sections 1.704-1(b)(2)(iv) and 1.704-2 and accordingly, except as otherwise
provided herein:
<PAGE>
(i) The Capital Account of each Tax Partner shall be credited by
(A) the amount of cash and the fair market value of property other
than cash contributed (or deemed contributed pursuant to Code Section
708) by such Tax Partner to the Tax Partnership (net of any
liabilities assumed by the Tax Partnership upon such contribution or
to which such property is subject at the time of such contribution);
and (B) the amount of any item of taxable income or gain and the
amount of any item of income or gain exempt from tax allocated to such
Tax Partner.
(ii) The Capital Account of each Tax Partner shall be debited by
(A) the amount of any item of tax deduction or loss allocated to such
Tax Partner; (B) such Tax Partner's allocable share of expenditures
not deductible in computing taxable income and not properly chargeable
as capital expenditures; and (C) the amount of cash and the fair
market value of any property other than cash (net of any liabilities
assumed by such Tax Partner or to which such property is subject at
the time of distribution) distributed to such Tax Partner.
(iii) Immediately prior to any distribution of property in kind,
the Tax Partners' Capital Accounts shall be adjusted by assuming that
the distributed properties were sold for cash at their respective fair
market values as of the date of distribution and crediting or debiting
each Tax Partner's Capital Account with its respective share of the
hypothetical gains or losses resulting from such assumed sales in the
same manner as gains or losses on actual sales of such properties
would be allocated under Paragraph 6 below.
5. Federal and State Income Tax Returns and Elections.
(a) The Tax Partners agree that the Depositor shall serve as the "tax
matters partner" (as such term is defined in Code Section 6231(a)(7) (the "Tax
Matters Partner") of the Tax Partnership. The Tax Matters Partner shall (i)
apply to the Internal Revenue Service for a taxpayer identification number for
the Tax Partnership, (ii) elect to adopt the accrual method of accounting and
the calendar year as the Tax Partnership's fiscal year (the "Fiscal Year"), (iv)
make such other elections as it deems proper, (v) prepare, execute and file the
necessary federal and state partnership income tax returns for the Tax
Partnership and (vi) keep the other Tax Partners informed of all material
matters that may come to its attention in its capacity as Tax Matters Partner.
Each Tax Partner agrees to furnish the Tax Matters Partner with all pertinent
information relating to activities under this Agreement which is necessary for
the Tax Matters Partner to prepare and file federal and state partnership
returns. In acting as Tax Matters Partner, the Tax Matters Partner shall use its
best efforts, but shall incur no liability to the other Tax Partners.
2
<PAGE>
(b) Within 60 days after the end of each of the Tax Partnership's
taxable years, the Tax Matters Partner shall send to each Tax Partner who has
been a Tax Partner at any time during the taxable year then ended such tax
information as shall be necessary for the preparation by such Tax Partner of its
Federal income tax return and state income and other tax returns, if any, in
states where the Tax Partnership is organized or is qualified to do business.
6. Allocations.
(a)(i) "Net Income" and "Net Loss" respectively, for any period, means
the income or losses of the Tax Partnership as determined in accordance with the
method of accounting followed by the Tax Partnership for Federal income tax
purposes, including, for all purposes, any income exempt from tax and any
expenditures of the Tax Partnership described in Code Section 705(a)(2)(B);
provided, however, (i) that any item allocated under Paragraph 6(c) shall be
excluded from the computation of Net Loss and (ii) that if, as a result of the
contribution of an asset whose fair market value differs from its adjusted basis
for Federal income tax purposes or as a result of the revaluation of the Tax
Partnership's assets, the book value of any Tax Partnership asset differs from
its adjusted basis for Federal income tax purposes, gain, loss, depreciation and
amortization with respect to such assets shall be computed using the asset's
book value consistently with the requirements of Treasury Regulation Section
1.704-1(b)(2)(iv)(g).
(ii) "Period" shall mean the period ending on each Distribution Date;
provided that as to the month in which the Closing Date occurs, Period
shall mean the period commencing on the Closing Date and ending on the
first Distribution Date and as to the period in which the Tax Partnership
terminates, Period shall mean the period beginning on the first day of such
period and ending on the date of the Tax Partnership's termination.
(b) The Tax Partners agree that the Tax Partnership's Net Income and
Net Loss and each item of income, gain, loss, or deduction entering into the
computation thereof for any Fiscal Year shall be allocated by first allocating
the Tax Partnership's Net Income and Net Loss (and each item of income, gain,
loss, or deduction entering into the computation thereof) for each Period or
portion thereof within such Fiscal Year (as if such Period (or portion) were a
complete fiscal year), dividing the amount of such allocations for the Period
ending March 15 on a daily basis between calendar years and then aggregating the
allocations for the portion of such Period within each Fiscal Year; provided,
that the Tax Partnership's Net Income or Net Loss for the period commencing
December 16 and ending December 31 may be determined on an estimated basis to
permit timely preparation of the Partnership's tax returns and reporting to the
Tax Partners.
3
<PAGE>
In the case of the transfer of any interest in the Tax Partnership, the items of
Net Income and Net Loss allocated for any Period with respect to the transferred
interest shall be allocated between the transferor and transferee of such
interest on a daily basis within such Period. The Tax Partnership's Net Income
and Net Loss for each Period within a Fiscal Year shall be allocated as follows:
(i) Net Income for such Period shall be allocated as follows:
(A) An amount of Net Income equal to the excess of (x) the sum
for such Period and each preceding Period up to the Period beginning
with the Closing Date, of (1) the product of the Pass-Through Rate
and (2) the Certificate Balance amount for such Period (and each such
preceding Period) over (y) all amounts allocated to the
Certificateholders pursuant to this Paragraph 6(b)(i)(A) shall be
allocated 100% to the Certificateholders (including the Depositor), in
proportion to their holdings of Trust Certificates; provided that the
product of (1) and (2) in clause (x) shall be computed on the basis of
a 360 day year consisting of twelve 30 day months.
(B) An amount of Net Income equal to the excess of (x) the sum
for such Period and each preceding Period up to the Period beginning
with the Closing Date, of that portion of any excess of the principal
amount of the Trust Certificates over their initial issue price
(disregarding accrued interest) that would have accrued with respect
to such Periods if the Trust Certificates were indebtedness and such
excess were original issue discount over (y) all amounts previously
allocated to the Certificateholders pursuant to this Paragraph
6(b)(i)(B) shall be allocated 100% to the Certificateholders
(including the Depositor), in proportion to their holdings of Trust
Certificates.
(C) Any remaining Net Income shall be allocated 100% to the
Depositor.
(ii) Net Losses for such Period shall be allocated as follows:
(A) 100% to the Depositor until the excess of the Adjusted
Capital Account (as hereinafter defined) balance of the Depositor over
the amount specified in Paragraph 3(a)(i)(A) (as adjusted for all
prior distributions of principal and accruals of market discount
income allocable to the Depositor) equals zero.
4
<PAGE>
(B) 100% to the Certificateholders (including the Depositor) in
proportion to their holdings of Trust Certificates, until the Adjusted
Capital Account balances of the Certificateholders equal zero; and
(C) Any remaining Net Losses shall be allocated 100% to the
Depositor.
(c)(i) Any deductions attributable to (w) the amortization of premium on
the Receivables, (x) payments to the Owner Trustee, (y) payments to the Servicer
and (z) payments of any other expenses, claims and losses of the Trust shall be
specially allocated to the Depositor.
(ii) If there is a net decrease in "partnership minimum gain" (within
the meaning of Treasury Regulation Section 1.704-2(d)) for a Fiscal year,
then there shall be allocated to each Tax Partner items of income and gain
for that year equal to that Tax Partner's share of the net decrease in
partnership minimum gain (within the meaning of Treasury Regulation Section
1.704-2(g)(2)), subject to the exceptions set forth in Treasury Regulation
Sections 1.704-2(f)(2), (3) and (5), provided, that if the Tax Partnership
has any discretion as to an exception set forth pursuant to Treasury
Regulation Section 1.704-2(f)(5), the Tax Matters Partner may exercise such
discretion on behalf of the Tax Partnership. In the event the application
of the minimum gain chargeback requirement would cause a distortion in the
economic arrangement among the Tax Partners, the Tax Matters Partner shall
request the Commissioner to waive the minimum gain chargeback requirement
pursuant to Treasury Regulation Section 1.704-2(f)(4). The foregoing is
intended to be a "minimum gain chargeback" provision as described in
Treasury Regulation Section 1.704-2(f) and shall be interpreted and applied
in all respects in accordance with that Treasury Regulation.
If during a Fiscal Year there is a net decrease in partner nonrecourse
debt minimum gain (as determined in accordance with Treasury Regulation
Section 1.704-2(i)(3)), then, in addition to the amounts, if any,
allocated pursuant to the preceding paragraph, any Tax Partner with a share
of that partner nonrecourse debt minimum gain (determined in accordance
with Treasury Regulation Section 1.704-2(i)(5)) as of the beginning of the
Fiscal Year shall, subject to the exceptions set forth in Treasury
Regulation Section 1.704-2(i)(4), including exceptions analogous to those
provided pursuant to Treasury Regulation Sections 1.704-2(f)(2), (3) and
(5) (provided, that if the Tax Partnership has any discretion as to an
exception set forth pursuant to Treasury Regulation Section 1.704-2(f)(5)
as made applicable by Treasury Regulation Section 1.704-2(i)(4),
5
<PAGE>
the Tax Matters Partner may exercise such discretion on behalf of the Tax
Partnership) be allocated items of income and gain for the year (and, if
necessary, for succeeding years) equal to that Tax Partner's share of the
net decrease in the partner nonrecourse minimum gain. In the event the
application of the minimum gain chargeback requirement would cause a
distortion in the economic arrangement among the Tax Partners, the Tax
Matters Partner shall request the Commissioner to waive the minimum gain
chargeback requirement pursuant to Treasury Regulation Sections
1.704-2(i)(4) and 1.704-2(f)(4). The foregoing is intended to be the
"chargeback of partner nonrecourse debt minimum gain" required by Treasury
Regulation Section 1.704-2(i)(4) and shall be interpreted and applied in
all respects in accordance with that Treasury Regulation.
(iii) If during any Fiscal year of the Tax Partnership a Tax Partner
unexpectedly receives an adjustment, allocation or distribution described
in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), which
causes or increases a deficit balance in the Tax Partner's Adjusted Capital
Account (as defined below), there shall be allocated to the Tax Partner
items of income and gain (consisting of a pro rata portion of each item of
Tax Partnership income, including gross income, and gain for such year) in
an amount and manner sufficient to eliminate such deficit as quickly as
possible. The foregoing is intended to be a "qualified income offset"
provision as described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)
and shall be interpreted and applied in all respects in accordance with the
Treasury Regulation.
A Tax Partner's "Adjusted Capital Account", at any time, shall equal
the Tax Partner's Capital Account at such time (x) increased by the sum of
(A) the amount of the Tax Partner's share of partnership minimum gain (as
defined in Treasury Regulation Section 1.704-2(g)(1) and (3)), (B) the
amount of the Tax Partner's share of partner nonrecourse debt minimum gain
(as defined in Treasury Regulation Section 1.704-2(i)(5)), and (C) any
amount of the deficit balance in its Capital Account and Tax Partner is
obligated to restore on liquidation of the Tax Partnership and (y)
decreased by reasonably expected adjustments, allocations and distributions
described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and
(6).
(iv) Notwithstanding anything to the contrary in this Paragraph 6, Tax
Partnership losses, deductions, or Code Section 705(a)(2)(B) expenditures
that are attributable to a particular partner nonrecourse liability shall
be allocated to the Tax Partner that bears the economic risk of loss for
the liability in
6
<PAGE>
accordance with the rules of Treasury Regulation Section 1.704-2(i).
(v) Notwithstanding any provision of Paragraphs 6(b) and 6(c)(i), no
allocation of items of loss or deduction shall be made to a Tax Partner if
it would cause the Tax Partner to have a negative balance in its Adjusted
Capital Account. Allocations of items of loss or deduction that would be
made to a Tax Partner but for this Paragraph 6(c)(v) shall instead be made
first to the Depositor to the extent not inconsistent with this Paragraph
6(c)(v), and second, to the Certificateholders in proportion to the amounts
distributable for the related Period pursuant to Sections 5.05(b)(iv) or
(v) of the Sale and Servicing Agreement, to the extent distributions under
either such Section were reduced. To the extent allocations of items of
loss or deduction cannot be made to any Tax Partner because of this
Paragraph 6(c)(v), such allocations shall be made to the Tax Partners in
accordance with Paragraphs 6(b) and 6(c)(i) notwithstanding this Paragraph
6(c)(v).
(vi) To the extent that any item of income, gain, loss or deduction
has been specially allocated pursuant to Paragraphs 6(c)(iii) and (v) and
such allocation is inconsistent with the way in which the same amount
otherwise would have been allocated under Paragraphs 6(b) and 6(c)(i),
subsequent allocations under Paragraph 6(b) and 6(c)(i) shall be made, to
the extent possible and without duplication, in a manner consistent with
Paragraphs 6(c)(ii), (iii), (iv) and (v) which negate as rapidly as
possible the effect of all such inconsistent allocations.
(vii) Any allocations made pursuant to this Paragraph 6 shall be made
in the following order:
(i) Paragraph 6(c)(ii)
(ii) Paragraph 6(c)(iii)
(iii) Paragraph 6(c)(iv)
(iv) Paragraph 6(c)(vi)
(v) Paragraph 6(c)(i)
(vi) Paragraph 6(b)(i) and (ii)
These provisions shall be applied as if all distributions and allocations
were made at the end of the Fiscal Year. Where any provision depends on the
Capital Account of any Tax Partner, that Capital Account shall be
determined after the operation of all preceding provisions for the year.
These allocations shall be made consistently with
7
<PAGE>
the requirements of Treasury Regulation Section 1.704-2(j).
(d) The income, gains, losses, deductions and credits of the Tax
Partnership for Federal, state and local income tax purposes shall be allocated
in the same manner as the corresponding items entering into the computation of
Net Income and Net Losses were allocated pursuant to Paragraphs 6(b) and (c)
provided that solely for Federal, local and state income and franchise tax
purposes and not for book or Capital Account purposes, income, gain, loss and
deduction with respect to property properly carried on the Tax Partnership's
books at a value other than its tax basis shall be allocated (i) in the case of
property contributed in kind, in accordance with the requirements of Code
Section 704(c) and such Treasury Regulations as may be promulgated thereunder
from time to time, and (ii) in the case of other property, in accordance with
the principles of Code Section 704(c) and the Treasury Regulations thereunder as
incorporated among the requirements of the relevant provisions of the Treasury
Regulations under Code Section 704(b).
(e) The Tax Partnership shall comply with all withholding requirements
under Federal, state and local law and shall remit amounts withheld to and file
required forms with the applicable jurisdictions. To the extent the Tax
Partnership is required to withhold and pay over any amounts with respect to
distributions or allocations to any Tax Partner, the amount withheld shall be
treated as a distribution to that Tax Partner. In the event of any claimed
overwithholding, Tax Partners shall have no claim for recovery against the Tax
Partnership or other Tax Partners. If the amount withheld was not withheld from
actual distributions, the Tax Partnership, may at its option, (i) require the
Tax Partner to reimburse the Tax Partnership for such withholding (and each Tax
Partner agrees to reimburse the Tax Partnership promptly following such request)
or (ii) reduce any subsequent distributions by the amount of such withholding.
If there is a possibility that withholding tax is payable with respect to a
distribution (such as a distribution to a non-U.S. Tax Partner), the Tax
Partnership may in its sole discretion withhold such amounts in accordance with
this Partnership may in its sole discretion withhold such amounts in accordance
with this Paragraph 6(e). Each Tax Partner agrees to furnish the Tax Partnership
with any representations and forms as shall reasonably be requested by the Tax
Partnership to assist it in determining the extent of, and in fulfilling, its
withholding obligations. If a Tax Partner wishes to apply for a refund of any
such withholding tax, the Owner Trustee shall reasonably cooperate with such Tax
Partner in making such claim as long as the Tax Partner agrees to reimburse the
Tax Partnership for any out-of-pocket expenses incurred.
7. Sale of Interests. The Tax Partners agree that any sale by a Tax Partner
of any ownership interest in a Trust Certificate
8
<PAGE>
shall be deemed to be a sale of all or a portion of such Tax Partner's interest
in the Tax Partnership.
8. Termination of a Tax Partner's Interest. Any distribution by the Tax
Partnership in termination of any Tax Partner's interest in the Tax Partnership
other than pursuant to Paragraph 9 below shall be in an amount of cash or
property other than cash having a net fair market value equal to the positive
Capital Account balance of such Tax Partner at the time such interest is
terminated, after such Capital Account balance has been adjusted in accordance
with Paragraphs 4 and 6 above for all operations preceding such distribution and
the applicable Treasury Regulations under Code Section 704(b), and shall be made
by the later of: (a) the end of the Tax Partnership's taxable year in which such
termination occurs; or (b) within 90 days after the date of such termination.
9. Distributions upon Termination. Upon termination of the Agreement
pursuant to its terms, the activities of the Tax Partners under this Annex A
shall be concluded and the assets subject to the Agreement and this Annex A
shall be distributed to the Tax Partners in the manner and in the order set
forth below:
(a) Debts of the Tax Partnership created pursuant to the Indenture on
the Trust Agreement, other than to Tax Partners, shall be paid.
(b) All cash on hand representing unexpended contributions by any Tax
Partner shall be returned to the contributor.
(c) The Tax Partners' Capital Accounts shall be adjusted by: (i)
assuming the sale of all remaining assets at their fair market values as of
the date of termination of the Trust Agreement; and (ii) debiting or
crediting each Tax Partner's Capital Account with the Tax Partner's
respective share of the hypothetical gains or losses resulting from such
assumed sales in the same manner as such Tax Partner's Capital Account
would be debited or credited under Paragraph 6 above for gains or losses on
actual sales of such properties.
(d) All Tax Partnership assets shall be distributed to the Tax
Partners in accordance with their respective Capital Account balances as so
adjusted by the later of: (i) the end of the Tax Partnership's taxable year
in which the termination occurs; or (ii) within 90 days after the date of
such termination.
If property subject to the Agreement is distributed pursuant to this paragraph,
the amount of the distribution shall be equal to the net fair market value of
the distributed property.
9
Exhibit 11
NAL Financial Group Inc.
Statement Re: Computation of Per Share Earnings
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Sep 30, Ended Sep 30,
------------- -------------
<S> <C> <C> <C> <C>
1996 1995 1996 1995
---- ---- ---- ----
PRIMARY:
Weighted average shares outstanding 7,044 5,444 6,857 5,277
Net effect of dilutive stock options
based on the modified treasury stock method 2,002 701 1,627 598
------- ------- ------- -------
Total weighted average shares outstanding 9,046 6,145 8,484 5,875
======= ======= ======= =======
Net income $ 2,182 $ 609 $ 6,142 $ 1,070
Income adjustment relating to reduction
of debt based on the modified treasury method 336 -- 758 --
------- ------- ------- -------
Net income available to common
and common equivalent shares $ 2,518 $ 609 $ 6,900 $ 1,070
======= ======= ======= =======
Per share amount $ 0.28 $ 0.10 $ 0.81 $ 0.18
======= ======= ======= =======
FULLY DILUTED:
Weighted average shares outstanding 7,044 5,444 6,857 5,277
Net effect of dilutive stock options
based on the modified treasury stock method 2,002 897 1,627 736
Net effect of dilutive subordinated
debentures based on the if converted method 2,175 -- 1,885 --
------- ------- ------- -------
Total weighted average shares outstanding 11,221 6,341 10,369 6,013
======= ======= ======= =======
Net income $ 2,182 $ 609 $ 6,142 $ 1,070
Income adjustment relating to reduction
of debt based on the modified treasury method 319 -- 722 --
Income adjustment relating to reduction of debt
based on the if converted method 384 -- 963 --
------- ------- ------- -------
Net income available to common
and common equivalent shares $ 2,885 $ 609 $ 7,827 $ 1,070
======= ======= ======= =======
Per share amount $ 0.26 $ 0.10 $ 0.75 $ 0.18
======= ======= ======= =======
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-31-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 4,572
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 91,986
<ALLOWANCE> 4,246
<TOTAL-ASSETS> 144,833
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 107,575
<LONG-TERM> 0
0
0
<COMMON> 26,786
<OTHER-SE> 10,472
<TOTAL-LIABILITIES-AND-EQUITY> 144,833
<INTEREST-LOAN> 6,211
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 6,211
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 2,859
<INTEREST-INCOME-NET> 3,352
<LOAN-LOSSES> 1,012
<SECURITIES-GAINS> 7,147
<EXPENSE-OTHER> 7,129
<INCOME-PRETAX> 3,578
<INCOME-PRE-EXTRAORDINARY> 3,578
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,182
<EPS-PRIMARY> .28
<EPS-DILUTED> .26
<YIELD-ACTUAL> 21.70
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,355
<CHARGE-OFFS> 4,797
<RECOVERIES> 5,688
<ALLOWANCE-CLOSE> 4,246
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
